Closing Costs Issues

In our part of the country there is a nine to twelve month inventory of "homes for sale" giving us a true "buyer's market". We're seeing "low ball" offers with buyers dictating the terms of closing costs. In the mortgage business we see Real Estate Purchase Contracts containing conflicting verbiage, ie. "seller will pay $2,000 of buyer's closing costs". No one knows what this actually means as there is no hard definition of "buyer's closing costs". It's just "closing costs" and it's all negotiable as to who pays what. Vague language in the contract brings another level of conversation between buyer, seller, Realtor and mortgage lender. Often this becomes a "blood pressure" moment that should have been eliminated early in the process.

We recommend that sellers order an appraisal before placing the home on the market. It's a $350 expense that eliminates a least half the "suprises" that occur during the entire sale process. With an appraisal, the seller knows the maximum amount he can expect from the sale of his property. For example, if the home appraises for $100,000, and the seller can live with

a net of $90,000; he can pay the Realtor's fee plus $4,000 of the total closing costs. Every seller wants to get every dollar he can from the sale, but you have to be realistic....you, the seller, are not going to net the appraised value of the home. Just doesn't happen in today's market.

Another place the "pre-listing" appraisal helps the sales process is that the appraiser will identify any "issues" with the property that must be correct prior to a sale. Most of the time they're minor wood rot problems that can be corrected with an afternoon's work with a hammer and saw. I remember one occasion when the Realtor and I put our tools in the back of the car and fixed the back steps on Saturday afternoon......the loan closed Tuesday.

Unless you have a cash buyer, don't expect to sell your home "as is" unless it is in pristine condition. Any flaw the appraiser notes in his report will have to be corrected prior to closing the loan. Just get the appraisal done first and avoid those "gotchas" that drive everyone crazy.

Good luck! If you have a mortgage question call me at 888-554-6755 or email jack@abcmortgageal.com.