Looking to the Lender
It’s common for Buyers — especially first-time Buyers, at lower price points — to include seller-paid closing costs as part of their offer.
So, instead of offering $200k for a home, the Buyer may offer $206k less $6k in seller-paid’s. See, “Maximum Seller Contribution: Not Just 3% Anymore.”
To the Seller, the deal nets to the same amount — $200k.
However, to the Buyer, the latter deal means $6k in cash that they don’t need to bring to closing (in effect, the Buyer is financing their closing costs).
Risks
When is that strategy risky for Sellers?
When the home is in multiple offers, and the ultimate sales price gets driven to the point where appraising may become an issue.
Then, option #2 makes good cents sense (sorry, couldn’t resist): build the Buyer’s loan costs into the loan itself, through a nominally higher interest rate.
So, instead of getting a 30-year fixed mortgage at 4.35% with $5k in closing costs, the Buyer/Borrower opts to pay 4.50% (or close) for the same loan with no closing costs.
Thanks to Edina Mortgage’s Steve Mohabir for that tip at today’s City Lakes office meeting.
