Home Buying in 60613>Question Details

Jake, Home Buyer in Denver County, CO

Seller paid closing costs?

Asked by Jake, Denver County, CO Thu Mar 13, 2008

I found a condo building in Uptown that looks great, and there is a 1 bd 1 bath unit where the seller is offering $5000 towards the closing. What does that mean exactly - will they give me the money to put towards the purchase price, or will I even see that money? If I make an offer for less than the asking price, can I still ask for the $5000?

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Hi Jake. Here is what I tend to do when closing costs are involved. Let the seller know with your initial offer that you would like to take them up on their closing costs credit. Then I would negotiate the price with the mindset that the $5,000 credit has nothing to do with the price you get the property for. This credit should have no affect on the fair market value of the home. It should be viewed as an enticement to motivate you to make in offer on their property instead of someone else's.

For a 1BR/1BA in Uptown $5,000 should cover everyting....but in no way will it be well over what closing costs are. Last thing I will say is be careful how the wording is with the closing costs credit as some lenders are funny about credits. Make sure it is stated clearly that these are to go towards closing costs.

As far as seeing the money....you will probably never hold it in your hands or roll around on yoru bed with it. It will more than likely be less money you will have to bring to the closing table.

Good Luck!! If you worked with an agent hopefully they're telling you all of this. This is day one information that my clients get. This is why we get paid....driving you around and looking as places anyone can do.
1 vote Thank Flag Link Thu Mar 13, 2008
When $5k is slated for closing costs, it must go toward closing costs which include title fees, recording fees, document preparation fees, mortgage application fees, appraisal fees, etc... It will appear on the HUD statement as a credit from the seller and be applied to those costs on the buyer's side of the sheet. You absolutely have the right to offer less for the condo, but the seller may withdraw the offer of closing cost assistance. Hope this helps.

Ben Bailey
Windermere West Valley
1 vote Thank Flag Link Thu Mar 13, 2008
The Seller is offering to pay for your closing costs, which are normally fees associated with the purchase, points on the loan, appraisal, etc. So, the money will not be handed over to you, it will be a part of the escrow process but certainly helps offset your costs.

Of course you may still offer less than the list price and ask for the closing costs in addition to the price reduction.

Best of luck with your purchase,
1 vote Thank Flag Link Thu Mar 13, 2008
you can /should modify the language so that the credit would cover not only closing costs, but prepaid expenses (such as escrows and interest on your mortgage)

it is critically important that you coordinate this with your mortgage lender, as not all lenders and not all types of loans ("programs") allow for closing cost credits and the amount allowed can also vary
0 votes Thank Flag Link Thu Mar 13, 2008
The advice given so far is absolutely correct. The one thing I would add is that the money will need to be used toward closing costs and $5,000 is well over what normal closing costs go for. You can convert the extra credit into points (or parts of a point) which can then be used to lower your interest rate and decrease your payment. However you approach it make sure that you use the entire credit. And this is just a starting point. You can ask for whatever you want when you negotiate the contract.
0 votes Thank Flag Link Thu Mar 13, 2008
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