Why Do Sellers Have to Pay the Closing Costs?
Closing cost is expensed over and above the seller's property cost before completing a real estate transaction. Examples of typical closing costs include fees related to the origination, underwriting of mortgage, real estate commission, insurance, and record filing. A big question that has been chiefly asked is, "Why should sellers pay for buyers' closing costs?"
Before we dive deep into why sellers should pay closing costs, we can give a simple explanation. You as a seller should pay the closing costs because it will translate to selling your home faster and even putting in more money to your account. If that does not sink deep, here is a full explanation from the genesis so that you can understand why home sellers have to pay closing costs. Nevertheless, before that, below are situations when you will be pushed to pay for buyers closing costs.
- If you reside in a hot area whereby prices are upscaling, inventory is low, and competition is raging.
- When your property has overstayed in the market due to poor condition or higher prices quoted.
- When you want to list and sell your home faster.
- Helping the cash strapped who find it hard to raise down payment and close on closing costs at a go.
- When you are in a buyers' market, and competition is stiff.
Sellers incur few expenses, but they spend a lot during closing. They deliver a real estate commission of 6% of the total purchase to buyers and sellers' agents. They also pay buyers title insurance policy. Apart from these, there are the sellers' concessions. Sellers' concession is the closing cost that the sellers agree to pay to relieve the buyer some burden on the closing day. Under the concession, sellers may agree to property tax, attorney fees, mortgage discounts, and attorney fees. All these are intended to lower the interest rate.
Concession is always louder in the buyers' market, where sellers rush to sweeten the deal so that their property sells faster. Another situation where seller's benefit could be rampant is when there are slow-moving homes. Slow-moving homes have been in the market long enough due to high prices, or the property is in bad condition.
Being willing to offer some incentive to your buyer's closing cost, you will increase the number of potential buyers for your home. Moreover, what does this mean? There will be increased bidding wars which will mean the ability to earn more. Consequently, many home buyers outside are struggling to come up with a down payment, closing costs, or even moving costs. Offering to pay the closing costs will be a weight lifted from their backs.
Related Post: 5 Problems Homeowners Face When Selling on Their Own
Sellers at one point have to pay for closing costs. Raising the down payment and settling closing costs may be so daunting to home buyers. Offering to clear up a closing price will be their relief. If you need to sell your home faster and have more money, closing costs will make you sell quicker and earn big.
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