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  • Questions that Salt Lake Home Buyers always ask (#7)

    Posted on January 17th, 2011 admin No comments

    My loan officer said that the seller will pay my closing costs.  Wouldn’t that save us thousands?

    First the facts.  The seller never actually pays a buyer’s closing cost.  The amount is simply deducted from your offer price to create a net price.  This “net” is what the seller looks at when considering your offer.  On the final accounting sheet (the HUD document) this “paid amount” is deducted from the seller’s proceeds and credited to the buyer, offsetting their closing cost.
    In negotiation the seller will often add the requested credit to their bottom line price for an acceptable offer.  This means that the buyer has actually just paid more than the market price for the property in order to spread out their closing cost over the lifetime of the loan.
    This is a good deal for the buyer only if:

    • The buyer doesn’t have a lot of cash for closing, or
    • The buyer would rather keep some cash on hand for remodeling.

    The risk is that the home won’t appraise for this inflated amount.

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