Up Pops the Real Price Tag - Washington Post 12/8 story
I have been approached by a number of real estate agents this week who wanted my advice on how to protect themselves and their sellers against having something like this happen to them. For those who didn't see the story and don't want to click the link, the Buyer's showed up at closing with a certified check $2000.00 below what they needed to close. They claimed it was the result of a bad estimate of closing costs. Ultimately the Selling agent ended up paying it by reducing her commission.
I and many of the agents I spoke with about this observed that in this market this "oops we don't have enough money" problem isn't necessarily the result of bad estimates, but a deliberate tactic on the part of hte Buyer to try and renegotiate the concessions (from the Seller or the Realtors) at the settlement table.
How can you keep that from happening. One thought that's occurred to me recently is to build as large a closing cost credit as the Lender will allow into your Sales Contract. There is very little risk to a Seller in adopting this approach as long as they understand that their likely net proceeds will be the Sales Price less the concession. In the event hte concession turns out to be larger than the lender allows, the Seller gets the windfall. In any case, the Buyer more than likely gets all of their closing costs (even the unexpected ones) paid for. Usually when we see a large closing cost credit on teh settlement statement we end up scrambling with the Buyers and their agetns to make sure they can use all of it. Usually the buyer and lender are able to find enough "prepaid" items to use the vast, vast majority of the closing cost credit . . .which is fine with the Seller as long as they haven't banked on getting any of the concession back.
On the other hand, it prevents the buyer from showing up at closing saying the closing costs were higher than they expected and therefore they don't hvae enough money to close . . . since the Seller is paying all of the costs.
What do you all think of this approach? Do you think it would help? Would Seller's go for it?
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I and many of the agents I spoke with about this observed that in this market this "oops we don't have enough money" problem isn't necessarily the result of bad estimates, but a deliberate tactic on the part of hte Buyer to try and renegotiate the concessions (from the Seller or the Realtors) at the settlement table.
How can you keep that from happening. One thought that's occurred to me recently is to build as large a closing cost credit as the Lender will allow into your Sales Contract. There is very little risk to a Seller in adopting this approach as long as they understand that their likely net proceeds will be the Sales Price less the concession. In the event hte concession turns out to be larger than the lender allows, the Seller gets the windfall. In any case, the Buyer more than likely gets all of their closing costs (even the unexpected ones) paid for. Usually when we see a large closing cost credit on teh settlement statement we end up scrambling with the Buyers and their agetns to make sure they can use all of it. Usually the buyer and lender are able to find enough "prepaid" items to use the vast, vast majority of the closing cost credit . . .which is fine with the Seller as long as they haven't banked on getting any of the concession back.
On the other hand, it prevents the buyer from showing up at closing saying the closing costs were higher than they expected and therefore they don't hvae enough money to close . . . since the Seller is paying all of the costs.
What do you all think of this approach? Do you think it would help? Would Seller's go for it?
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posted by Marcus Simon at
10:51 AM
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