Seller Credit Closing Costs

Buying a home can be a costly affair and if you are a qualified buyer, you may want to take the help of a seller credit for closing a sale. This is basically a loan a financed by a seller to allow the buyer to cover their closing costs and in turn, hasten the sale of their property. A seller can voluntarily offer a credit in order to attract more buyers and in some cases the buyer can request the seller to do so in their purchase offer. The amount of seller credit for closing costs is typically in the range of 4-6% of the sale price and it is added to the overall offer price.

How Do Seller Credits Work?

Seller credits can have a major impact on your overall sale or purchase price and there are some things that should be considered before bringing them into use. The following describes how seller credits to buyer work.

Seller Credit Closing Costs

Seller Credit for Closing Costs

The actual closing costs vary a lot depending on various factors involved in the real estate transaction, but in general, you should expect to pay anywhere between 3% to 6% in addition to the actual asking price. For example, a buyer who needs $5000 in credit for a $100.000 home will have to request 5 percent assistance from the seller and will make an offer of $105,000. If the seller agrees, the buyer can then ask his lender to pass a loan keeping in view the total purchase price of $105,000. There are mainly two types of costs involved in a closing.

Recurring vs Nonrecurring Closing Costs

The buyer and seller can negotiate the terms of a seller credit as per their liking keeping in view the market conditions and their own finances. There are certain limitations to what a seller credit may cover. Some sellers will only agree to pay non-recurring closing costs such as escrow fees, notary, wire fees, attorney fees, endorsement, state or city transfer taxes, home inspection costs and natural hazard disclosures. On the other hand, some sellers agree to pay recurring fees such as fire insurance premium, property taxes, prepaid interest and any other closing costs that are recurring.

Seller Credit for Mortgage

One of the main concerns with crediting closing costs is that the lender has to approve all associated costs which appear on the HUD-1 settlement statement during closing. If you are planning to use the seller credit option towards mortgage to close a deal, the following points should be taken care of:

  • Never give a personal check to the buyer at closing
  • Do not ask the title company to give the buyer a check
  • Do not allow your real estate agent to write a check for the buyer

Do not allow your real estate agent to write a check for the buyer

Benefits of Seller Credits

Seller credits have the potential to greatly benefit both the seller and the buyer. Sellers can use this option to bump up their asking price, thereby increasing their total profit. Buyers who are on a limited budget can buy a property with the help of seller credits which would not have been possible otherwise. So it’s a win-win for both parties involved in a transaction.

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