Why Home Sellers Should Pay a Buyer’s Closing Cost


Both buyers and sellers have expenses in a real estate transaction. As the home seller, your biggest cost is the real estate agent’s commission, plus you’ll have to cough up cash for attorney fees, the title transfer fee, and the termite and moisture report. But since these costs are typically deducted from the profit, chances are you won’t need to bring cash to closing. It’s a different story for home buyers.

Buyers pay a variety of closing costs, which can range from 2% to 5% of the sale price. These include the loan origination fee, the appraisal, credit report fee, title search fee and a host of other mortgage-related expenses. Some buyers also pay their own closing costs, but others ask home sellers to cover this expense.

You may feel it’s not your responsibility to pay a buyer’s closing costs. They’re the ones purchasing the property and getting the loan, so it only makes sense that they pay their own costs, right? Your feelings are just. But don’t quickly reject the idea of paying a buyer’s closing costs. Here’s why.

  1. Paying the closing cost increases interest

Buying a property is expensive. And saving money for both a down payment and closing costs is too much for some buyers to handle. They go into the process with the intent of asking the seller to cover their costs.

You’re not required to pay a buyer’s closing costs. However, agreeing to pay these costs can result in a faster sale. If you don’t offer this type of assistance, the buyer will move on and find a seller who will. Of course, if you’re not in a huge rush to sell the property, you can always hold off and wait for a buyer that doesn’t need assistance. But if you need a fast sale, offering this concession can peak a buyer’s interest.

  1. You have plenty of equity

In most cases, offering to pay a buyer’s closing costs isn’t an out-of-pocket expense for you. The money is taken directly from your profit. So if you have plenty of home equity, paying this expense shouldn’t create too much of a financial hardship. However, before agreeing to pay closing costs, do the math and assess how much you need to walk away with. This is especially important if you’re putting the profit toward a payment on your next place. Remember, the sale price of the house must be enough to cover the mortgage payoff and the realtor’s commission. If you agree to paying a buyer’s closing costs prematurely, your net profit could be less than anticipated, and you could end up paying the buyer’s expense out-of-pocket.

  1. You don’t have to pay all of the closing costs

Agreeing to assist a buyer with closing costs doesn’t mean you have to pay “all” of their expense. The more you offer, the faster your home may sell. Still, only offer what you can afford. A borrower may ask for $6,000 in closing cost assistance, but you can counter and only offer $3,000 in assistance. The good news is that different mortgage programs limit how much you’re allowed to contribute in seller concessions. You can contribute up to 4% with a VA loan, up to 3% with a conventional loan and up to 6% with an FHA loan.