Closing costs are a topic of confusion with both buyers and sellers.
Both buyers and sellers have closing costs - or fees required to complete the purchase and sale of a piece of real estate. But, in a Seller's Market a Seller is much less willing to pay the buyer's closing costs and asking for closing costs can lead to the rejection of an offer or at least a counter offer.
What are Closing Costs?
For the Buyer those fees will vary by the type and amount of the mortgage. Those fees can include: bank fees like loan origination fee, appraisal fee, credit checking fees, closing fee, title insurance, attorney fees, homeowner's insurance, loan funding fees, flood determination and flood insurance, inspection, and down payment, and there can easily be others.
For the Seller, closing fees will also vary but can include: helping the buyer pay their closing costs, abstract updating, attorney fees (deed), Realtor Professional fee, home inspection resulting in repairs, mortgage payoff fees, prepayment penalty, wiring fees, home warranty, recording fee, revenue stamp fee among others.
A Simple Example:
In the Storm Lake Iowa area a buyer's closing costs will range up to 3% of purchase price - not including the down payment.
So if a buyer offers $100,000 on a property listed at $105,000 and asks for 3 % of purchase price for closing costs and prepaids you may be surprised at what the seller actually gets at closing. This simple example can help a buyer see closing costs from a seller's point of view.
$100,000 Offered purchase price
-$3,000 closing costs requested from seller to help buyer
$97,000 Seller receives before they pay ANY of their fees - they are now $8,000 below their listing price.
So, the takeaway, if you are a buyer in a market that is in a Seller's Market phase (more buyers than homes to buy), to compete you may have to offer more if you need the seller to pay part of your closing costs.
Confused - I can help explain this process and get you the best terms when buying or selling real estate in the Storm Lake Iowa area. Call or text me today Georgia Weaver 712-291-0118