TO THEIR CREDIT

Home sell­ers give clos­ing cost help

Richmond Times-Dispatch Weekend - - SCOREBOARD - BY MAR­I­LYN KENNEDY MELIA

If there’s one thing home buy­ers need, it’s cash. Now, ex­perts say, con­di­tions in many mar­kets are shift­ing, and buy­ers are find­ing cash from a sur­pris­ing source: the seller.

A grow­ing in­ven­tory of homes for sale in many mar­kets is prompt­ing “More sell­ers to ac­cept of­fers with seller con­ces­sions,” ob­served Jen­nifer Bee­ston, vice pres­i­dent of Guar­an­teed Rate, a na­tion­wide lend­ing firm.

In past months, se­vere short­ages of homes on the mar­ket meant it wasn’t un­com­mon for buy­ers to drop all re­quests from their pur­chase of­fer, said Ralph Schu­mann, past pres­i­dent of the Illi­nois Real Es­tate Lawyers As­so­ci­a­tion.

Tra­di­tion­ally, buy­ers who re­quested clos­ing cost as­sis­tance weren’t un­usual. Clos­ing ex­penses are fees from the mort­gage lender plus other charges that can run a few thou­sand dol­lars.

“The typ­i­cal ask is in the $3,000 to $5,000 range,” said Dave Sha­l­abi, a bro­ker at RE/MAX Syn­ergy, Or­land Park, Ill.

The ques­tion then arises: Why won’t the sell­ers just ac­cept a lower price in­stead?

That’s be­cause in the unique math be­hind mort­gage fi­nanc­ing, clos­ing cash is a bet­ter help to the buyer be­cause it al­lows more of the buyer’s money to be used for the down pay­ment. Also, rate of­fers are in­cre­men­tally bet­ter for larger down pay­ments.

Con­sider the buyer of a $200,000 home who dili­gently saved 10 per­cent down pay­ment of $20,000. Re­duc­ing the price to $195,000 still means he needs $19,500 for 10 per­cent down, which is just $500 less, but he’d prob­a­bly be mak­ing a down pay­ment for much less than 10 per­cent since $3000 of his sav­ings would be needed for clos­ing.

Buy­ers some­times ask for other con­ces­sions, but clos­ing cost as­sis­tance is the most com­mon. For in­stance, Schu­mann said if a buyer asks for cred­its at clos­ing to cover re­pairs for prob­lems un­cov­ered in the home in­spec­tion, lenders may not make the loan.

Clos­ing costs as­sis­tance from the seller to the buyer rarely ex­ceeds 3 per­cent, al­though dif­fer­ent mort­gage pro­grams have dif­fer­ent lim­its, con­cluded Bee­ston.

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