Should a buyer ask the seller for assistance on their closing expenses?
What the heck is a credit at closing for a buyer? When I ask a buyer when we are doing our buyer consultation if they would like a credit at closing when structuring an offer, they often look at me like I have 2 heads:) I thought it would be fitting to share so maybe if one of those buyers reads this they will feel like an empowered informed buyer and will look at me with confidence and say ‘Absolutely!’
A credit at closing is when a buyer makes an offer and asks the seller to give them a credit at closing to go towards there closing costs and pre-paid expenses (homeowners insurance, building inspection, etc.). The credit reflects in the final executed contract if all parties to the contract agree.
The seller can’t just give a buyer money at close for anything. That would be nice, but is against lending rules. They can give a credit to help with the buyers closing cost expenses only. So if a buyer makes an offer for $300,000 & a $5000 credit at close that buyer is actually offering the seller a net of $295,000. This is important to understand because if making an offer in a competitive market, the price needs to be aggressive to take into consideration the buyer credit request since the seller’s net on sale price is less due to the credit. I would guesstimate more than 1/2 the offers we write have a buyer’s credit at closing included. Its a super common practice nowadays, especially in the St. Louis market where you have mid range pricing and buyers that need assistance.
Really that credit a buyer receives they pay back in the form of additional mortgage, but for many a credit is super helpful with allowing a buyer to be more liquid friendly at closing so they can have a greater down payment or fix-up money to make there new home a gem! The Buyer’s Agent will be the guide through this and help determine the best coarse. Our experience shows it is best to figure out in initial stages.
Buying a home is pricey and the expenses at closing are great. You have lender fees, title fees, inspections, escrows for taxes and insurance, and often additional realtor fee. Depending on the price of the property they can easily be $5000-$8000+! Ouch, that is a bite out of the old checkbook! So, if a seller is willing to help with the hefty costs costs by allowing a closing credit and the buyer has the need for it I would say that is a perfect real-estate marriage:)
I will give a little caution to any that care. If the closing costs do not meet the credit a buyer is getting sadly that negotiated money goes back to the seller. A buyers credit can only be used for closing costs and prepaids:( A buyer can’t walk away with money from the purchase they just made. Best practice we do is always confirm with the lender what credit amount should we ask for on behalf of the buyer. Then we are assured that no money is left on the table & we have a HAPPY New Homeowner:)