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  1. #1
    Senior Member himespau's Avatar
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    Getting a seller to pay closing costs?

    So I'm going to be buying a new house in the next couple of weeks (assuming all goes well). At least, we have a house hunting trip in the city we're moving to scheduled next week with our realtor. The bank that has pre-whatever us (I'm pretty sure the load officer told me over the phone were pre-approved for $X, but my wife rightly thinks that at this stage we should only be prequalified for that amount - another bank specifically did send us pre-approved notice) said that we should try to get the seller to pay closing costs (even if that means that we pay more) so we can get a larger downpayment.

    Is that hard to do? In the negotiation process, if they say they want $X, do we offer them that, but ask them to pay closing? Offer $X+4k in exchange for closing? Is it common for sellers to pay those costs? Does it depend on how long the house has been on the market?

    I mean I get why the bank wants us to have more down while having the closing costs paid, but I just don't know how this whole thing works. I'm crappy at negotiating and I sort of feel like any real estate agent won't really be on our side because they get paid 3% of the final sales price (unless they're the selling agent too, then they get 6%), so it's not really in their best interest to get the price as low as possible.

    That and, since every house is different, it's hard to know what the fair market value for a house is (I had the same problem on a much smaller scale with engagement rings, but I don't have to live in that for the next 30 years). Unless, is a tax assessment a reasonable peg for value? There's one house that looks good from the listings we've been sent online, but the sellers have been trying to sell it for at least a year through various real estate agents from the looks of things and they change agents every 6 months or so. So far the house has dropped ~1/4 in price from original asking, but it's still about twice what the neighboring houses are estimated to be worth and the tax assessment is 2/3 what the asking price is. I see lots of houses and the prices are all over the place and, since I don't know the city, I don't know if it's a neighborhood thing, a school district thing, or some other thing beyond my current guesses. I guess it's just sort of a freaky thing for me not to be in control of so many variables in such a big decision.
    Last edited by himespau; 10-09-12 at 02:22 PM.
    Punctuation is important. It's the difference between "I helped my uncle, Jack, off a horse" and "I helped my uncle Jack off a horse"


  2. #2
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    I can't comment on the other things, but it isn't unusual at all to ask the seller to pay the closing costs as part of the negotiation.

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    First off all never offer full price unless its the greatest house you've ever seen and you want it right at that moment. 10-12% less is pretty common for an opening offer. I just bought my second house (close in a couple weeks) and we got them to pay $4,000 towards closing.

    Its all about cash flow. For me, I knew given interest rates I was only going to put down the minimum down payment. So having them pay 4k towards closing saves 4k in my bank account. Maybe the price is 4k higher than I could have gotten otherwise but over the course of the loan thats no big deal to me. Plus its nice to not wipe out your cash reserves when you buy a house because you will find there are many things you need shortly after move-in (lawnmower, furniture, plants/trees, ect.)

    Hope this helps, really closing costs is just another part of the negotiation. Remember, you don't have to buy their house - but they more than likely HAVE to sell it. -- You have the upper hand.

    Edit: PS. if you don't know the city at all I would suggest getting an apartment or townhouse for 6-8 months. You should be able to find something with a short lease. This will take some of the pressure off. I never understood how people can pick a house out in one or two weekends. It takes me months but I am pretty picky.
    Last edited by driftincowboy; 10-09-12 at 02:47 PM.

  4. #4
    Senior Member mikeybikes's Avatar
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    We just bought a house. They were asking $213K. We offered, $206K+seller pay closing. They countered $210+seller pay closing. Worked for us.

    Depends on what the house is worth to you.
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    Quote Originally Posted by himespau View Post
    crappy at negotiating and I sort of feel like any real estate agent won't really be on our side because they get paid 3% of the final sales price (unless they're the selling agent too, then they get 6%), so it's not really in their best interest to get the price as low as possible.
    We were hostage to a realtor selling our last house because we moved across country from it, but we have only bought houses w/o realtors and have only been very happy going that route.

    That and, since every house is different, it's hard to know what the fair market value for a house is (I had the same problem on a much smaller scale with engagement rings, but I don't have to live in that for the next 30 years). Unless, is a tax assessment a reasonable peg for value? There's one house that looks good from the listings we've been sent online, but the sellers have been trying to sell it for at least a year through various real estate agents from the looks of things and they change agents every 6 months or so. So far the house has dropped ~1/4 in price from original asking, but it's still about twice what the neighboring houses are estimated to be worth and the tax assessment is 2/3 what the asking price is.
    Different municipalities/counties/whatever assess at different proportions of their estimate of market value so looking at one assessment in one place where you don't know how that trend goes, no I would not say it's too informative.

    You really need to look at recent sales and figure out why the house you're targeting should cost more or less than those ones did. If you're not using a buyers' agent (and they're not using a sellers' agent) you can spell out your reasoning to the homeowner and let him/her respond.

    Multiple 6 month listings sounds like absentee owners who don't *need* to sell and haven't conceded the house isn't worth what they want it to be. You could find a persuasive way to communicate to them what you think it's worth.

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    Quote Originally Posted by driftincowboy View Post
    Edit: PS. if you don't know the city at all I would suggest getting an apartment or townhouse for 6-8 months. You should be able to find something with a short lease. This will take some of the pressure off. I never understood how people can pick a house out in one or two weekends. It takes me months but I am pretty picky.
    +1 we have not bought w/o renting in the area for at least a year first

  7. #7
    Senior Member himespau's Avatar
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    Yeah, I know we could go that route and might have to, but our new employer is picking up the cost of this move, it'll already be our third move in a little more than a year, and we're tired of moving. Sure, there are better reasons to buy a house than we don't want to move again, but our realtor has convinced us that this is the best time of year to buy (more competition in spring summer, in fall sellers are worried about the house not selling over the winter and having to eat the costs so they're more likely to move, etc.), so we're going to make a big effort to get this done before our new jobs (setting up labs at a university, which will take a lot of time from us) get going. Also, with our daughter, we don't want to keep uprooting her. But yeah, if we don't find anything, we don't have to buy. It could also be that we both have these ideas of what our dream home is in our heads and we honestly can't afford the perfect house. So we need to settle. Anything's got to be better than the cramped apartments we've lived in forever, and I suppose I need to convince myself that my first house doesn't have to be my last one, though I really do hate moving.
    Punctuation is important. It's the difference between "I helped my uncle, Jack, off a horse" and "I helped my uncle Jack off a horse"


  8. #8
    Senior Member longbeachgary's Avatar
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    It is not unusual to ask the seller to pay closing costs but depending on the type of market that you're in (buyer's market or seller's market), they may or may not agree to it. Locally here things have started to turn. It seems that every home that comes on the market is getting multiple offers and is selling for more than asking price. This is the same nonsense that got us into the trouble in '08 but history is repeating itself. You could ad the closing costs into the offer price and ask for it back as a credit to closing. So if you were going to offer $145,000 but need $5,000 in closing costs, offer $150,000 with five thousand back. The way that this could backfire is if the home does not appraise for the value you need (let's say it only appraises for 143 - that's the highest amount that the bank will finance so the deal is dead).

    The best way to determine how much to offer on a property is to have your agent do a market analysis just as they do when they list a home and just what the appraiser will do once you've picked a home. The CMA will give you homes that are active, pending and closed for a particular area for a particular time. Let's say that 3 bedroom, 3 bathroom homes in a particular area have sold in the last 3 months for $150,000 - this is your starting point. You're going to give a little for good amenities and take away for bad.

  9. #9
    Senior Member himespau's Avatar
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    Quote Originally Posted by driftincowboy View Post
    First off all never offer full price unless its the greatest house you've ever seen and you want it right at that moment. 10-12% less is pretty common for an opening offer. I just bought my second house (close in a couple weeks) and we got them to pay $4,000 towards closing.
    Huh, 10-12% less? I'd have thought that might be seen as insulting and not even get a response. I suppose it all depends on the price range you're looking at.
    Punctuation is important. It's the difference between "I helped my uncle, Jack, off a horse" and "I helped my uncle Jack off a horse"


  10. #10
    on by skijor's Avatar
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    Quote Originally Posted by himespau View Post
    Huh, 10-12% less? I'd have thought that might be seen as insulting and not even get a response. I suppose it all depends on the price range you're looking at.
    Closer to 15% is what I encountered selling mine last year. And the house was in good shape. Move-in ready. I suppose some sellers might be insulted enough not to respond. I asked my realtor wtf was with such a ridiculous bid and that I told her not to even respond. She explained that that's part of the back-and-forth nonsense and not to be offended. I did end up getting a reasonable amount which included me covering closing costs.

    And fair market value was nowhere near the assessed value...at least around here. A difference of 20%. After that experience, I'll be marching down to city hall to contest the property tax amount if it's way off on the new house. I am also in the process of buying.

  11. #11
    Senior Member mikeybikes's Avatar
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    Our property's assessed value is about 20% less than the fair market value.
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  12. #12
    Senior Member himespau's Avatar
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    Quote Originally Posted by skijor View Post
    And fair market value was nowhere near the assessed value...at least around here. A difference of 20%. After that experience, I'll be marching down to city hall to contest the property tax amount if it's way off on the new house. I am also in the process of buying.
    Oh your assessed value was over the selling price? Most of the ones I've seen while looking are 20-30% below the asking price if not more. If I manage that, I'll just keep my mouth shut and pay my lower tax.

    I did wonder why our realtor kept sending us listings of houses that were probably 8% what we told her our upper limit was (she had a filter set up to automatically send us houses in the neighborhoods she thinks we'll like from roughly 75% - 108% our upper limit). I just figured she was trying to get us to consider bumping up our limit a little, but maybe she was factoring in negotiation). I still don't want to go above my upper limit (especially given that a lot of the nicer houses are in neighborhoods with HOA's and that's an added cost we have to factor in).

    As it is, given that this will be our first house and we've just been grad students and postdocs for the last 10-12 years, we don't have enough saved (without tapping retirement funds, and we're not going to do that) to hit the 20% downpayment mark so we're going to have to pay PMI until we can refinance, which sucks, so I'm hoping to avoid getting hit with a HOA bill too.
    Punctuation is important. It's the difference between "I helped my uncle, Jack, off a horse" and "I helped my uncle Jack off a horse"


  13. #13
    Administrator CbadRider's Avatar
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    Quote Originally Posted by himespau View Post
    I'm crappy at negotiating and I sort of feel like any real estate agent won't really be on our side because they get paid 3% of the final sales price (unless they're the selling agent too, then they get 6%), so it's not really in their best interest to get the price as low as possible.
    I have bought 4 homes and have never had a real estate agent balk at making a lower offer because they wanted a higher commission. When I purchased my current home, my agent actually suggested I offer $7K less than I did. I should have listened to her.
    Quote Originally Posted by toddles View Post
    So Tom only hires people that are nutty? Is part of the requirement to be a moderator on this site is that you have to be nuts??
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  14. #14
    on by skijor's Avatar
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    Quote Originally Posted by himespau View Post
    Oh your assessed value was over the selling price? Most of the ones I've seen while looking are 20-30% below the asking price if not more. If I manage that, I'll just keep my mouth shut and pay my lower tax.

    I did wonder why our realtor kept sending us listings of houses that were probably 8% what we told her our upper limit was (she had a filter set up to automatically send us houses in the neighborhoods she thinks we'll like from roughly 75% - 108% our upper limit). I just figured she was trying to get us to consider bumping up our limit a little, but maybe she was factoring in negotiation). I still don't want to go above my upper limit (especially given that a lot of the nicer houses are in neighborhoods with HOA's and that's an added cost we have to factor in).

    As it is, given that this will be our first house and we've just been grad students and postdocs for the last 10-12 years, we don't have enough saved (without tapping retirement funds, and we're not going to do that) to hit the 20% downpayment mark so we're going to have to pay PMI until we can refinance, which sucks, so I'm hoping to avoid getting hit with a HOA bill too.
    I'm speaking of the assessed value on my prop tax statement. I live in a bit of a real estate bubble here. Real estate is, by my estimation, cheap in comparison to the rest of the country. I was paying prop taxes on $92,000 (house and land). It sold for $74,000 which is what comparable properties were listed for. I am not complaining because it sold relatively quickly where many similar properties are still sitting vacant. WI has comparibly high prop tax rates. Still nothing compared to CA or NY where a fixer upper runs north of $300k. In principal, I would like my prop tax assessment value to be reasonably close to the fair market value. I don't call a 20% difference reasonably close. Yes, markets change. But still.

    I went a little above my limit partially because of lower interest rates. Also, this great new home is in an excellent location and has been kept up. It would be easy to sell.

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    Senior Member himespau's Avatar
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    Quote Originally Posted by CbadRider View Post
    I have bought 4 homes and have never had a real estate agent balk at making a lower offer because they wanted a higher commission. When I purchased my current home, my agent actually suggested I offer $7K less than I did. I should have listened to her.
    And I'm sure that's the case for most good real estate agents. For one thing they need to think about the longer term big picture about getting referrals and repeat customers rather than picking up a quick bug, but there's always part of me that thinks that when she's getting paid on commission our interests might not always be in sync. On the other hand, she knows the market there and we don't.

    Based on some people's comments here, I mentioned to her 3 houses that we liked that her server had sent us that were past our upper limit saying that we liked them, but they were beyond what we were willing to spend and, since she new the market, if she thought the sellers might come down she could put them on the list of houses we'd see when we visit next week, but if she didn't think that sounded reasonable for them she should leave them off. Just wrote me back saying she'd make an informal contact with the seller's agents to see if it was at all worth our time.

    Also trying to use her to get a sense for why some houses that we think look sort of nice have been sitting on the market for a year or more. I had been trying to do that via neighborhoods and the values of neighboring houses, but those values seemed pegged on tax assessments and she says hers is about half of the current value of her house, so who knows. I guess we just have to trust that she knows what she's doing (has been in the business for 20 years or so and many of my future coworkers in my new job have used her).
    Punctuation is important. It's the difference between "I helped my uncle, Jack, off a horse" and "I helped my uncle Jack off a horse"


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