Why Home Sellers Pay Buyer Closing Costs

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.

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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┬ácontractual┬átrick 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.

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About Joe Manausa, MBA

Joe Manausa, MBA is a 22+ year veteran of real estate brokerage in the State of Florida and has owned and managed his own company since 1992. He is a daily blogger with content that focuses on real estate analytics and providing his clients with a tactical advantage in today's challenging market.

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  1. My husband and I are looking to buy our first home. We finally found something that we could see ourselves living in the only problem is the house needs some unfinished work and the sellers are asking more then we think the home is worth. The sellers are in the midst of construction on their lower level even though it is habitable little things like drywalling the ceilings and hardwood flooring and minor detailing is needed. The house is listed at 224,000 the origional listing was 240,000. Online the description says, sad to leave, Job transfer. My agent told me they are in no hurry to leave the house and have had offers lower then 200k that they did not accept. The sellers are willing to negotiate 210,000 with no closing costs or 215,000 with 5,000 closing costs. Looking at this it doesnt really make any difference either way its 210,000. My question is which is a better deal for us in the long run? even with the 5,000 dollar credit will it be factored into the loan and if so won’t that be more money in the long run then just paying the closing costs in the first place? Need some guidance and help!

    • Sylvia, you need to be asking these questions to your agent. If you think your agent is incapable of giving you the advice you need, hire a different agent.

      Your situation requires more background information before I could give you specific advice, but I would suggest that it rarely pays to chase an overpriced listing. The only way to change a seller’s motivation is with $$$. It seems like you should find a better deal.

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