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Seller Paid Closing Costs

Before continuing on this seller paid closing costs page, please read Disclaimer Page

If you the seller are willing to pay all or some of the buyer's closing costs, this can be a great incentive for a buyer to buy your house, rather than a neighbor's house who is not offering this carrot.

I can't possibly cover all the laws and by-laws in every jurisdiction, so I will just stick with what is probably most common when it comes to offering paid incentives, that are legal.

The areas I am familiar with, you can not, do the following:

Inflate the price of your house above appraisal value to cover the seller paid closing costs, then pay cash back to the buyer to pay for the closing costs and conceal this arrangement from the mortgage lender.

The above would be considered mortgage fraud and could lead to some severe penalties, including possible incarceration in the big house.

If you are looking for other ideas, just select any of the following thumbnail photo links now, or after you finish this page (link provided.

If you did the above and disclosed it on the offer to purchase and therefore to the mortgage lender, it would not be mortgage fraud, but the mortgage may not be approved.

While I'm on the subject, you should always disclose this information on the selling contract.

Again you should always have contract forms on hand when selling for sale by owner.

If you want some very reliable, sources for up-to-date lawyer written contracts, just check out: By Owner Forms

So How do You Arrange Seller Paid Closing Costs?

seller paid closing costs

Good question. You have to make some decisions on what you are willing to sacrifice to make the sale. Here are some things to consider;

  • Set a limit, as to a dollar amount you are willing to spend.

  • Decide what you are willing to pay.

  • Look at your net from the sale that you are willing to accept and take this into consideration.

A Couple of Examples Please

Let's start off with setting a limit.

You do not want to accept an offer, that just states that you will pay all of the buyer's payouts.

A Visitor's Testimony

I just read your page on "The Bold the Timid and the In-Between" and found it very informative.

That could be interpreted as every expense the buyer might incur, including buying down the interest rate on the mortgage, legal fees, a survey, etc. etc. etc. This could run into some real serious money.

To protect yourself, you put an amount in the offer to purchase. You might write something to the effect that you would pay the up to a maximum amount of $3,000.00.

You would also add that this money would be paid directly to those third parties, from the proceeds of the sale. Again, don't make this a cash back to the buyer directly.

When talking about seller paid closing costs you could also specify what you would cover, as in the second example above, instead of a set amount.

You could specify that you would pay for the buyer's title policy, recording fees, courier fees and perhaps the remaining portion of the property taxes for the year, as an example.

Just make sure you have a very good idea of what these expenses paid by you will be, before committing to them.

As in the third example above, work out your net from the sale.

If your house appraises for $275,000.00 and you are offering to pay $3,000.00 of the buyer's closing costs, you are now really selling your house for $272,000.00.

Should you do that? I mean sell $3,000.00 under appraised value? It is of course up to you. However, the whole idea of the seller paid closing costs is to help sell my house instead of sell their house.

Your competition may be willing to drop their house to $268,000.00, so you have to be prepared to offer the carrot.

Who are Your Buyers?

When you offer seller paid closing costs for a buyer, it's good to know who you are marketing this incentive to.

The buyer that has 50% down payment and makes $250,000,00 annual income is not going to care less if you want to pay some of their expenses.

Nope, you, are looking for the following buyers in most cases;

A) The cash poor buyer: They have a good income, but never seem to save enough money to buy a house. They have managed to scrape together 5% down payment, but they have no idea where they are going to come up with the rest of the expenses.

In rides the "white knight" with a solution! YOU!

B) Another type of buyer could be the: "I'm going to need money to build that deck, or buy a big screen TV for the family room, or I need all new appliances." These buyers have enough for a down payment and closing costs, but they have nothing left over for the extras.

Do I see a white knight just up ahead?

C) How about the: "It's a buyer's market and therefore, I want something extra from the seller!" Yep, when things are tough for the seller, buyers want more than just a good deal for their money, they want a great deal.

It might be much better if you paid $3,000.00 for closing the costs than take a $8,000.00 hit on the price.

Very Interesting

Several months after I wrote this page, I searched online for other sites that offered advice on seller paid closing costs. I was quite surprised to find that over and over, it was suggested that the buyer was not receiving anything.

As an example, if you were offering the house for $200,000.00 and the buyer wanted you to pay $5000.00 in buyer closing costs, the seller would add on the $5,000.00 to the selling price, thus inflating the price to $205,000.

My train of thought is different. The market is tough, the buyers are few and far between so, you actually offer to pay the closing costs and not bump the price up. This is a true incentive to the buyer.

The other way, the buyer actually ends out "mortgaging" the closing costs which in my mind, is not a good financial move.

The following link gives an estimate of closing costs in various states throughout the country. I cannot, of course, vouch for the accuracy.

Closing Costs in the USA by State

Always Double Check

Before proceeding with any seller paid closing costs, do your homework first. When? As soon as possible. Before the situation arises.

Go to your real estate lawyer, your mortgage lender, or your mortgage broker. Tell them you would like to offer seller paid closing costs to a buyer. Ask them what and how you can offer this incentive, so as to be above board and legal in your area.

Ask for the approximate amount for various buyer closing costs in your situation, so you have a better idea what to offer. The amount will vary depending on the strength of the buyer, so ask for the worst case scenario.

Make Sure You Promote

Don't forget to advertise your willingness to pay some or all of the buyer's closing costs. Don't keep any buyer incentives a secret.

Put this information in: 

Newspaper Ads

Internet Ads

Yard Signs

Flyers and Feature Sheets

For a peek at some of the best for sale by owner websites and save you all the research, please go to, Advertising by Owner Websites.

Does this seem like a lot of extra work doing these seller concessions like seller paid closing costs? Yes, it is. Do you know what is worse? Not selling my house and watching the neighbor's sold sign go on their sign.

One final note: This whole website is all about selling for sale by owner. You can still be more flexible than your neighbor who is listed with a full-service Realtor because you don't plan on paying $13,750.00 in real estate commissions for example.

For More Information about Seller Incentives

For other ideas when selling in a soft market, just select any of these thumbnail photo links found here.

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