How to avoid closing costs when buying a home
Closing costs can be rather expensive and can seem like a large burden, particularly for first-time homebuyers who don't have a lot of money for a down payment.
However, it's a common practice to ask the seller to pay some or all of the buyer's closing costs. This arrangement can be worked into the purchase offer, either as a set dollar amount or a percentage of the sale price. For example, if a seller is asking $200,000 for the home, an offer might be "$195,000, plus 3% of the purchase price toward buyer's closing costs."
Sellers are usually inclined to agree to pay closing costs with an otherwise attractive offer. If you plan to ask for seller-paid closing costs, here's how to give yourself the best chance of a "yes."
- Make a strong offer -- generally, when asking for closing costs, a purchase offer is made for close to the full listing price. In the example of an offer of $195,000 plus up to 3% back at closing, this is really worth just over $189,000 to the seller, so be sure to keep the true value of your offer in mind.
- Offer a quick close -- sellers are more likely to respond favorably to a purchase offer if a quick close is part of it. Seller-paid closing costs with a 30-day close may look a lot more attractive than another offer asking for a 60-day close
- Make fewer demands -- in a nutshell, the easier your offer seems, the more likely a seller will be willing to give you what you want. A buyer who wants seller-paid closing costs and a new deck, a repaved driveway, a patched-up roof, and 10 other repairs may seem like more trouble than it's worth.
The bottom line on closing costs when buying a home
While closing costs can be expensive, they shouldn't be the limiting factor that keeps you from buying a home. In fact, it's quite common for sellers to pay both sides of closing costs to obtain a quick and easy sale, so it may be a good idea to put this request in your offer if you're low on cash. After all, the worst anyone can say is "no."