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!