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How to reduce closing cost in buying or selling a home?

Asked by , Fri Jul 13, 2007

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Know your market conditions! If you are buying property at a time when the market is flooded with listings (as is the case in many areas across the country right now), a good agent will help you negotiate closing cost assistance from the seller. In a normal market, it is not unusual for a buyer to offer a slightly higher purchase price in exchange for a credit back from the seller towards nonrecurring closing costs. That way, you essentially finance the closing costs over 30 years (or whatever loan term you utilize). If the purchase price is at or near top market value, however, you could run into problems with the appraisal. For sellers, I look at it from another perspective. You shouldn't focus on cost so much as the bottom line. How do you put more money into your pocket? Rather than fixating on a percentage point or two in cost, concentrate on the entire value of the property. Price it properly, get it properly conditioned for showing and market it heavily to ensure that you command the full value that the market will bear.
Web Reference: http://www.RayandPaul.com
2 votes Thank Flag Link Fri Jul 13, 2007
An excellent way to reduce your closing cost when buying or selling a home is to research and thoroughly investigate down payment and/or closing costs assistance programs. Let's face it, most consumers do not buy homes because they don't have thousands of dollars laying around. This is the #1 reason why I hold FREE workshops to help educate and empower people with the information they need to make an informed buying decision. Here are 2 great programs. Go to http://www.nehemiah.com and http://www.naca.org. The Nehemiah program is especially good because the program encourages motivated sellers to give "gift funds" to the borrower. This program has helped over 200,000 people get into their dream homes. Try it and write me back to let me know how you made out. Hopefully like a bandit.. Take care.
2 votes Thank Flag Link Fri Jul 13, 2007
Compare the fees charged by closing attorneys and lenders.

When buying - home with equity will offer the potential to ask for the Seller to cover the Buyer's closing costs.

Best Regards,
Maureen Cody
The Keys To Charleston LLC
0 votes Thank Flag Link Mon Apr 30, 2012
Many of the fees associated with buying a selling a home are fixed. Some are negotiable.

If you retain an attorney to assist with the transaction, fees can range from a a few hundred to several thousand.

Real estate agents work for real estate brokers. Brokers determine commission rates and determine what level of authority the individual agents shall have in that firm in negotiating individual commission rates or fee structures for representation. If an agent tells you they have no authority to reduce a fee, and it is established by their firm, that may very well be correct.

Title fees in many states are regulated.

Lender fees are probably one of the most overlooked opportunities for cost savings in a purchase of real estate. Application fees, appraisal fees, etc. are all possibilities for negotiated savings. The loan officer may sometimes have the authority to waive these fees for a client, or reduce them, or absorb them by route of a discount in their commission earnings.

I am unfamiliar w/ programs that reduce recordation fees or title transfer taxes. Every HUD (settlement statement) I have ever seen follows the same formulas for these fees. That doesn't mean it does not exist for you. Passing on my experiences (over a decade) with closings.
0 votes Thank Flag Link Fri Jan 23, 2009
Deborah Madey, Real Estate Pro in Brick, NJ
Lots of ways to accomplish this and the easiest one is to ask the seller to cover some of the costs...sometimes you can roll this into the price of the home or use this as the way you choose to negiotiate. Let me know if I can be of any assistance.

Randall Sandin, 843-209-9667, rsandin@carolinaone.com
0 votes Thank Flag Link Fri Jan 23, 2009
Lender fees will be lower if you accept a higher interest rate.
0 votes Thank Flag Link Thu Jan 22, 2009
Ask the seller for help, even if you offer a little more and ask seller to pay your out of pocket expenses. At these low interest rates it will cost you so little to cover your additional costs.
0 votes Thank Flag Link Thu Jan 22, 2009
Closing costs are the culmination of a variety of fees, including:
-Real estate agent fees
-Lender Fees
-Fees for Title Insurance
-City/Jurisdiction recordation and title transfer taxes
-Prepaid fees (fees the lender required you to pay in advance for insurance, condo fees, real estate taxes etc...)

By category, here are some strategies to reduce fees:

Real estate agents: Buyers and sellers can both negotiate with their agents for reduced commissions. Every rela estate agent has the power to reduce his or her commissions, but some agents do it as standard business practice. In addition, buyers - be wary of administrative fees that your agent charges YOU. Many of the bigger brokers slip in a $200 fee at clsoing that is charged to the buyer, even though the agent is already getting paid from the commission. Many buyers don't even notice this fee because they are so overwhelmed at closing.

Lender fees: Lender fees are mostly administrative fees for a couple hundred dollars a pop that add up. They are negotiable, especially if you can show another lender who is giving you a comparable interest rate, but is not charging fees. Bank of America recently introduced a no-fee mortgage that you can use to induce other lenders to waive fees. Points on your loan will also show up as lender fees. If you don't want to pay points, your interest rate may be a little higher thought.

Fees from Title Insurance: The cost of title insurance is unregulated in many states. There are no guidelines, so shop around with a few companies. You are paying for 2 things: the insurance itself, and the administrative fees involved in doing the title search. Genreally, if the fees are really low, they will probably charge you for the insurance, and vice versa. Make sure you ask your title insurance company if a "re-issue" rate is availabe. If a title search has been done on the property in the past couple of years, you may be entitled to a discount. Note that there are two types of insurance "Limited" and "standard". Standard is more expensive and of course, is what will be offered you by default. Do your research and see if "limited" is sufficient for you.

City/Jurisdiction recordation and title transfer taxes: Concur with other posters, that you should check out city programs that help with these fees. If you are in Washington, D.C., I can help you with some great programs.

Prepaid items: Always close at the end of the month. That way, you owe less at closing in prepaid interest.
0 votes Thank Flag Link Tue Aug 7, 2007

Good questions. When buying a home the answer is a little easier to answer. If you purchase a new home or an existing home in the middle to lower price range there is a good chance you can negotiate some if not all of your closing cost especially if your market is saturated with homes in your price range.
When selling your home that takes a little more effort. You will probably be hiring a number of professionals during your listing period so ask for a competetative price. You will have many people suggest asking your Realtor for a commision reduction but I do not recommend this. When you reduce the commision you usally reduce the compensation to the buyers agent at the same time. In a difficult market agents sales go down and they try to find new ways of earning more. The most natural way is to see what properties you will show first and what the compensation is to the selling agent. I have found that many homes in today's market are losing value the longer they are on the market. The attempt to save a couple of thousand on your Realtor's commision could cost a great deal more when your home has not sold after 4-6 months.

Good Luck.
0 votes Thank Flag Link Tue Aug 7, 2007
I think the best way is to negotiate lender fees. Recently, I have seen lenders opting to drop origination fees and closing cost to attract business. Check with lenders in your area because this may not be the case in every local. That being said, its always a good idea to shop financing cost.
0 votes Thank Flag Link Fri Jul 13, 2007
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