How to Negotiate Closing Costs When Buying a House

Hey y’all, Zach McDonald, your real estate agent with Real Property Associates, and today we’re gonna talk about how to negotiate your closing costs When buying a house. First of all, let’s talk about what closing costs are. When buying a house, you’re going to have costs associated with the purchase, typically two to 3% of the purchase price. These costs are going to be loan costs and title and escrow fees. They’re going to be inspection costs, appraisal costs. All of those different costs worked together are typically in that two to 3% ballpark. Now, some buyers can’t afford to make their down payment and also pay this additional two to 3% in closing costs. Other buyers can’t. Other buyers can only afford to make that down payment, but they don’t have enough money left over for their closing costs. And still, some buyers have enough money to make that closing cost payment, but they don’t want to.

So what do we do? There actually are ways to go about asking the seller to pay your closing costs. Now, I want to just start off and say that not every seller is willing to do that, but it is possible to ask and have the seller pay these closing costs, and we’ll talk about how to negotiate those here. The first thing you need to do is ask, okay, if you don’t ask, you don’t have, you don’t receive. That’s what my mom told me growing up. She always told me to ask. You never know. Later on in life I’ve learned that’s actually in the Bible. It’s something that Jesus said, right, wisdom from Jesus. But in this setting, asking is important. Now, how you ask is also important. Sometimes if a house has just come on the market and it’s new, it’s hard to negotiate the price in general, let alone those closing costs.

Because when the seller is looking at the offer, they’re looking at what they’re going to walk away with. So if you’re willing to pay their asking price, but you’re also asking for them to pay a portion of your closing costs or all of your closing costs, they’re looking at a lower net proceeds, then they would be looking at if you paid full price and didn’t ask for closing costs. Pretty straightforward and logical, but on the seller side, they are looking to get the most money they can for their property. So sometimes it’s difficult early on to ask for those closing costs. Conversely, if the house has been on their market for 30, 60, 90 days in the sellers having a tough time selling it, that’s a great opportunity to approach the seller. And there’s usually a lot more room for negotiation, sometimes in the price, sometimes asking for closing costs, and sometimes you can get a combination of the two. Let’s run through a few different scenarios. First scenario, the house is newer on the market. The seller hasn’t dropped the price, and you really like it and wanna make an offer, but you can’t afford to or don’t want to pay those closing costs. In this scenario, you need to ask the question, and you should always ask this question, what’s the seller looking for? What’s most important, the seller in this situation? If you are making an offer and there are other offers, you are going to need to be more competitive, and it’s tough to ask for those closing costs to come out of the asking price. Conversely, if there aren’t other offers on the property, you’re gonna have more negotiating power. So again, it just depends on what the overall situation is, but let’s assume there are no other offers on the table. It’s perfectly reasonable to make a full price offer and ask for those closing costs to be paid in full. Or in part now the seller has the opportunity to respond back and make a counter offer. They can come and say, you know what? We’re willing to pay half your closing costs, or We don’t want to pay them at all. But at least you’ve tried. If you really want the house and the seller’s not willing to budge, you can add your closing costs on top of the purchase price.

The benefit to the seller is they are getting the same amount of money. Either way, they’re getting that same amount of net profit in the sale. Now, for you as a buyer, you are having to pay a higher price for the house, but you’re preserving cash. You don’t have to pay those closing costs. And if you can’t pay them, this is one of the only options if you really want a house that the seller and the seller’s not willing to budge. Now the risk of this option is that the appraisal comes in low, maybe near that original asking price versus the price that you have now agreed on with those additional closing costs baked in. So in that situation, we’d have to renegotiate a little bit to make sure that the purchase can proceed. The second scenario we’ll talk about is a house that’s been on the market for some time.

And in this situation, the seller maybe 60, 90 days in, hasn’t had any offers, hasn’t dropped the price yet in this situation, and they really want to make a sale. Well, in this situation, it’s a lot easier to approach the seller and ask for those closing costs to be paid. We can make a full price offer, sometimes even offer less, and also ask for those closing costs to be paid. And in this situation, as the buyer, you’re gonna be really happy. You’re gonna get a discount on the price. Plus you’re not going to have to put that additional cash out on the closing costs. The seller in this situation is tired of having their house on the market. They really want make the sale and they’re going to be the most likely to negotiate this third scenario, you are already under contract. You have negotiated the price and terms on the purchase and your doing your inspection. Now, after the inspection, sometimes things come up. Sometimes there are issues with the house and they need to be rectified. Now, in this situation, you can ask for the seller to make those repairs. Other times you can ask the seller to compensate you in some way for those repairs. And one of those ways they can compensate

You is by paying all or a portion of your closing costs. So maybe up front they aren’t paying those closing costs, and if you don’t need them covered, you can enter into contract without them being covered, and then potentially negotiate all or a portion of your closing costs to be paid during the inspection period. So we’ve talked about a few different strategies and ways that you can negotiate and ask for your closing costs to be paid by the seller. That first option is by adding some additional money to the purchase price in order to offset those closing costs. The second option is purely asking for those closing costs to be paid. And in the correct situation, the seller would be willing to cover those closing costs just to move on with the sale. The third option we talked about is negotiating. Those closing costs in during the inspection period in Seattle have been able to successfully use all three of these different strategies when negotiating for clients.

And funny story, when we bought the house that we currently live in, we asked the seller to pay our closing cost, and they came back with the answer no. They said, no, we don’t need to sell right now. We’re not motivated enough. Whatever their reasoning was, ultimately they weren’t going to pay our closing costs. And so we are able to add those closing costs on top of the purchase price. And what that allowed us to do is buy the house. But it also allowed us to preserve some cash and keep some money that we didn’t want to put into the transaction at that time. They were the ones doing it, and we were able to finance those closing costs over 30 years. So if you’re a buyer and you find yourself in that same situation, maybe you can afford to pay your closing costs, but you don’t want to.

There are ways like we did to add to that price and have the seller pay those closing costs. I hope if you came into this video with fears about closing costs, that you’re leaving more confident and more empowered than you came into this video with. Thank you so much for watching this video. I really appreciate your attention. If you found value in this video, please consider subscribing to my channel so that you can see other great real estate content like this. And if you know somebody who could benefit from this video or other videos on my channel, please share them with them.