Today’s buyers can be easily excited at the sound of paying no closing cost or no down payment. And with closing cost edging 2-4% of a purchase price it shouldn’t come as a surprise that no buyer wants to pay unless they have to. When it comes to paying it isn’t a matter of whether there is closing cost. A more important question is who is paying?
The responsibility typically falls on one of four parties: Buyer, seller, bank, or gift.
Will the buyer pay? A bulk of the closing cost (2-4%) is the responsibility of the buyer. Did you know that buyers who pay their own closing cost have a higher chance of winning in a multiple offer situation?
Will the seller pay? Sellers seldom offer to pay closing cost unless doing so lead to getting more offers or higher sale prices. If the seller pays will the increase in purchase price increase the risk that a property will not appraise? Likewise, in a buyer’s market not offering to pay closing cost can lead to selling at a discount or no offer.
Will the bank pay? In 2021 Wells Fargo Bank has been known to pay upto $5000 of a buyer’s closing cost with no strings attached.
If the bank pays, will the buyer pay back in the form of a higher interest rate or loan fee?
If the buyer pays, will the buyer have sufficent amount for down payment to qualify for a loan?
If it is a gift, will the funds be properly documented?
No matter who pays the closing cost the money will need to come from somewhere. AND–In many situations the closing cost can mean a difference between closing a deal, walking away, or losing out to a better offer.