By Marilyn Kennedy Melia | CTW Features
You’ll know if buyers are gaining purchasing power in your market when sellers bend to some buyer requests.
Now, with rising rates, buyers can particularly benefit by asking sellers to contribute part of their closing costs – even in lieu of slashing the asking price.
Closing costs can be hefty, up to six percent or so of purchase price. “It varies state-to-state,” says Danny Marshall of Mortgagerateguru.com.
Some buyers take advantage [of seller’s contribution to their closing costs] to ‘buy down’ their interest rate,” explains Joe Dawson of Mission Mortgage, Washington, DC. By paying one percent of the loan amount upfront, for instance, a mortgage borrower can usually lower his rate by one-quarter of one percent.
Additionally, putting more towards a down payment may lower the mortgage rate, or eliminate the need to pay for mortgage insurance.
“In a normal market,” explains Chase Michels of Compass Real Estate, in Hinsdale, Ill., “a buyer’s agent would negotiate as much of the closing costs as possible.” But where there’s still a thin supply of properties for sale and high buyer demand, sellers usually won’t pony up for the buyer’s closing expenses, Michels adds.
Gauge the interest in the property and a seller’s motivation. “If a buyer is willing to be flexible on the closing date, then maybe the seller is willing to chip in $2,500 towards closing costs,” he illustrates.