“Why Should I Help Pay the Buyer’s Closing Costs??”
To the “Greatest Generation,” Millennials (roughly ages 18 to 30) can seem spoiled and irresponsible.
To Millennials, the “Greatest Generation” — those who were alive during World War II — can appear stubborn and unreasonable.
How does that generation gap play out in residential real estate deals?
At least occasionally, with some . . . shall we say, “bones of contention” that require special attention to surmount.
Exhibit A: Buyer Closing Costs
A prime example of that would be Buyers who make an offer on a home that provides for Seller-paid closing costs (also known as “points”).
Such a request is very common amongst first-time Buyers and at lower housing price rungs.
It’s also usually OK with banks, provided it’s for a small percentage of the deal — typically less than 3% (it can create appraisal issues above that).
In practice, then, instead of a Millennial Buyer offering $300k for a home, they might offer $307,500 less $7,500 in Seller-paid closing costs.
Seller Math
Should the Seller care which of those two offers they get?
Not really.
They’ll pay nominally higher commission on the deal with points — the industry convention is to calculate Realtor commission on the gross sales price — but that’s a small price to pay if the alternative is to sit on the market, unsold.
And unless the home fetched an especially lofty price (possibly due to multiple offers), seller-paid points are not likely to rock the appraisal boat.
So, what’s the rub?
“Rocking the (Appraisal) Boat”
To at least a few members of the Greatest Generation, the practice seems unfair.
“No one paid for our closing costs when we bought this house,” they’ll often mutter.
Maybe so, but that’s not how the housing market works today.
Decades, ago, when the Greatest Generation were buying and building their long-time family homes, closing costs were only hundreds of dollars, not thousands (due not just to inflation, but to a bevy of new fees and taxes).
Of course, once upon a time, homes cost perhaps $20,000 to $30,000, not $250,000 (or $500,000!); health care and college were cheap or free(!) (“Thanks, G.I. Bill!”); and companies had long-term employees with actual retirement pensions.
Oh! And the workweek was 40 hours long — not 24/7 with one employee now tasked with what five might have been doing not very long ago.
“Generational Interpreter”
The best way for Realtors to bridge such gaps is by continually educating Buyers and Sellers about industry practices, as well helping them decipher the other side’s foibles and idiosyncracies mindset and expectations.
It certainly helps when the agents have already established trust and goodwill with their clients, so that they’re credible in their role as “generational interpreter.”
Fortunately, it also helps that Millennials and the Greatest Generation often share another strong connection: their relationship as grandparents and grandchildren.
P.S.: someone once said that the reason grandparents and grandchildren get along so well is that they have a common enemy (who presumably are also “Baby Boomers”).
