Closing Costs for the Buyer, Paid by the Seller

Seller Concessions / Closing Cost Assistance

So you are going to ask the Seller to help pay some of your closing costs.

Let’s take a look at what that means for both you as the Buyer and for the Seller.

It is important to know how your request to have the Seller pay some of your closing costs impacts them. It will help you create an offer that has a better chance of getting accepted.

****NOTE: For purposes of this discussion, when we use the term “closing costs” it will be referring to the combined cost of BOTH closing costs AND prepaid expenses.****

First, you need to understand that both the Buyer and the Seller have closing costs.

The Buyers closing costs include a wide variety of expenses that usually add up to 3%-5% of the purchase price.

Here are few examples of closing costs:

• Lender fees such as origination fee, processing fee, or underwriting fee
• Title Insurance and Title Fees
• Government and/or recording fees
• Notary fees

The most common prepaids items are:

• Upfront property taxes
• Homeowners insurance
• Escrow account money
• Mortgage interest

Your property tax is going to be one of the main expenses that makes your total amount fluctuate. Your city, county and school district all impact the amount of property taxes you will pay.

The Seller's closing costs also include numerous expenses and usually add up to 7-9% of the purchase price.

Here are a few examples:

• Michigan property Transfer Tax
• Realtor commissions - Sell Side
• Realtor commissions - Buy Side
• Title Insurance and Title Fees
• Unpaid property tax
• Government and/or recording fees
• Notary fees

While it is not a closing cost, the Seller also has to pay off the remainder of their mortgage before the property is sold. This is done at closing.

OK, so now you understand Buyer and Seller closing costs.

Let’s move on!

When a Buyer asks the Seller to pay part of their closing costs, the Buyer is asking the Seller to pay all of their own closing costs PLUS some of the Buyer's!

The Buyer then has less cash to come up with at closing because the Seller is paying some of their costs.

The request to pay for closing costs is usually in either a flat dollar amount or as a percentage of the total purchase price. For our examples, we’ll use a flat dollar amount.

Let’s say the home you are looking to purchase is $200,000 and you are going to ask for $8,000 in closing cost assistance from the Seller.

This means the Seller must take $8,000 in expenses right off the top before paying their own expenses.

Here is an example: