May 30, 2019

Can I ask the seller to pay the closing costs in my Florida home purchase? How does that work?

seller paying cllosing costs for buyer

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seller paid closing costs

Seller paid buyer closing costs in a Florida home sale.


It is quite common for home buyers to ask sellers to contribute money towards their closing costs, in order to minimize their out of pocket up-front costs. 

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HOW SELLER PAID BUYER CLOSING COSTS WORK:

EXAMPLE:

John and Mary want to buy a Jacksonville, Florida home for $200,000.

John and Mary anticipate $5,000 of closing costs to be due at closing. They offer the sellers $205,000 with the seller crediting the buyer $5,000 towards their closing costs, and the sellers agree.


At closing the $5,000 over the $200,000 goes towards paying John and Mary’s closing costs, so John and Mary avoid having to pay any closing costs out of pocket.



FREQUENTLY ASKED QUESTIONS ABOUT CLOSING COST CREDITS:

What happens if there is only $4,000 of closing costs? Can the buyer pocket the extra funds? Usually not. If you don’t use up the funds, they are generally lost.


Can we ask for the sellers to pay our down payment too? No – lenders will generally not allow this. You will have to bring your own funds for the downpayment.


What is the downside of having the sellers contribute towards the closing costs?


  • The property has to appraise at the higher value. If the property doesn’t appraise the sale will have to be renegotiated.
  • The buyer is essentially financing the closing costs, and the loan will be for a higher value than if there were no seller concessions involved.
  • Lenders may have limits to what concessions are allowed, and some won’t allow them at all. Make sure to discuss this with your lender prior to making an offer.
  • Seller concessions may be limited in some short sales or REO sales.
  • Commissions and conveyance taxes will be calculated at the higher sales price.

Minna Reid

Minna Reid is a Broker Associate at Florida Homes Realty & Mortgage, serving northeast Florida.

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