A common question that we receive from home sellers relates to the structure of a real estate offer and whether or not they should “have to” pay buyer closing costs.
At first blush, why the heck would a home seller agree to pay thousands of dollars on behalf of a buyer, it does not seem fair or right, right?
But when you consider what is really happening, home sellers who are willing to pay buyer closing costs are likely to net more money from the sale of their homes than sellers who do not.
Why Anybody Has To Pay Buyer Closing Costs
First of all, why should anybody have to pay buyer closing costs, and what are they?
Closing costs are all the fees and expenses created on behalf of a homebuyer during the purchase of a home. They include governmental fees, loan fees, appraisals, surveys, warranties, and anything else generated by the actions of the buyer.
The seller has closing costs as well, so it often seems crazy or punitive for a home seller when asked to pay buyer closing costs.
But maybe not.
Why Home Sellers Should Pay Buyer Closing Costs
The most important thing for a home seller (in order to create more value to gain top dollar when selling a home) is to increase the size of the buyer pool for the seller’s home.
The reason that all sellers should be willing to pay buyer closing costs is due to the fact that there are many people who are cash-strapped after selling a depreciated home, so they do not have enough funds to pay a down payment and all of the closing costs associated with a sale.
If a seller is willing to pay buyer closing costs, then the seller has effectively increased the size of his/her buyer pool. The more people that want the home, the greater the value.
So the key is focusing on how much money the seller nets (walk away money so to speak).
My way of looking at it is this. I don’t care if I pay a billion dollars in closing costs so long as I get more money at closing than I would if I paid no closing costs.
Think about it. If paying buyer closing costs facilitates a sale at a higher price than anybody else is willing to pay, and if you net more money from closing, do you really care about what’s happening with the buyer’s side? Do you care what the buyer pays, or what you get?
It’s all about the bottom line. Use any contractual trick possible to optimize your net when you sell.
Of course, if you want to know more about the how to pay buyer closing costs, creative contracts, and increasing your buyer pool when you sell a home, just drop me a note and we can schedule a time to help you plan your home sale.
About Joe Manausa, MBA
