How can I reduce closing costs with seller concessions?
Both buyers and sellers pay closing costs in a real estate closing. Sellers typically pay more than buyers, depending on whether a real estate agent is involved -- around 8% to 10%, according to Zillow (NASDAQ: Z) (NASDAQ: ZG).
The average buyer's closings costs for a home are between 2% and 5% of the total loan amount or sales price, according to the National Association of Realtors (NAR). This can equate to the buyer having to pay several thousand dollars more at closing on top of the down payment.
Buyers can request seller concessions to help reduce the amount of cash needed at closing.
For example, if the buyer has $22,000 in total for the purchase of a home and is putting $18,000 down, they can request the remaining funds needed for closing costs as a seller concession.
A common method of reducing closing costs with seller concessions is by the buyer offering a higher amount than the list price with a seller concession. For example, if the list price is $225,000 the buyer could offer $230,000 with a $5,000 seller concession at closing. This would reduce the total closing cost needed from $11,250 (that's 5% closing cost at $225,000) to $6,500 (that's 5% of $230,000, minus $5,000).