Real Estate

Who Pays Closing Costs?

They’re lots of misconceptions on this topic. It seems, sellers think buyers should pay for just about everything, and many buyers want sellers to pay all costs (thus reducing their required cash out of pocket). The truth is the answer as to “who pays?” is negotiable.

So, when it comes to closing costs, what exactly are we talking about? On the seller’s side are real estate commissions, legal fees, pro-rated real estate taxes, and owner’s title insurance. Sellers almost always pay the commissions; and pay the other items as well more often than not. On the buyer’s side are inspection fees, appraisal, loan fees, homeowners insurance, and escrow set-up costs. Buyers pay these almost always, unless they can negotiate to have the seller pay some or all of them. Generally speaking, sellers pay buyer’s closing costs most often on lower-priced homes and on deals where the buyer has a limited cash down payment (say, like 5% or less).

Sometimes the amount of buyer’s closing costs that seller can pay is limited by law. For example, VA loans only allow the seller to pay buyer’s costs up to 4% of the price. With FHA that number is 6% and with Conventional mortgages it is 3% if the buyer puts 10% or less down, and 6% otherwise. On contract transactions their is no limitation.

Like so many things in a real estate deal, who actually pays closing costs is negotiable. If you have questions about how to best structure a deal so it works for you in your specific situation… call, text or write. I work harder to make good things happen!

Local Sales Red Hot

MIBOR released its’ November sales report, and it’s fair to say the market is red hot. November sales were up a whopping 23% over a year ago. To be sure, buyers had an extra incentive as mortgage rates jumped a percent in recent months, and many were rushing to meet rate lock deadlines. How rates play out going forward is a jump ball. If anyone tells you otherwise, please let me know where they got there crystal ball.

New listings were also up, but at 6% (versus the 23% gain in sales), so the inventory of available homes continued to decline. Basic supply and demand would suggest that prices should be up. And no surprise, that’s what they were. The median average sales price came in at $152,000; up 4.8% over November 2015.

I hope you had an outstanding holiday and are looking forward to a prosperous new year. Whether you’re thinking about buying or selling in 2017, let me know— I work harder to make good things happen! ‘Nuff said.

How Buyers Pay for Homes

I came across a headline, “All Cash Buyers Dominate Florida and Midwest.” Really? I’m thinking you’ve got to be kidding. I mean, who has cash to buy a new home outright? Turns out, there’s more of that going on than you might imagine. From 32% in Chicago, to 45% in Cleveland, 31% Nashville, to 42% of Orlando home sales and 54% of Miami’s! That’s a lot of cash sales. For sure, those aren’t the result of a tidal wave of working stiffs all of a sudden becoming ultra savers and stockpiling cash for down payments. Nor have multitudes won the lottery of late. No, a very large percentage of these purchases arose as a result of the Fed’s easy money policies. Basically, the money moved from the Fed to the big banks, and from there to hedge funds- all at ultra low rates (like lower than anything you or I have ever seen when taking out a mortgage). The hedge funds then bought up the bulk of the foreclosures at rock bottom prices along with some other good deals, and converted these to single-family rentals. They’re now the biggest landlords in the country. And the infusion of these outside funds into the home market has pushed prices higher and higher.

Here in Indianapolis the story has taken a different twist. The percentage of cash buyers actually decreased this past year, from 26% to 22%. I guess we must not be as attractive a market as some of those other places.

Meanwhile, the rest of us have bought homes the old fashioned way- with a mortgage. Most recently, 46% of local buyers used a Conventional mortgage. 21% took out a FHA mortgage. (That number actually surprised me as I would’ve guessed it to be higher in this market.) Just 5% used a VA mortgage, and even fewer RD or contract financing.

If you have questions how financing might help you buy or sell a house… call, text or write. I work harder to make good things happen!