It’s no secret the Austin real estate market is booming. Buyers are having to make more concessions than sellers, and many buyers think sellers will make absolutely no concessions for them. In practice, it is not as one sided as you might think. Though we are still in a seller’s market, buyers are still able to effectively negotiate closing costs paid by the seller if they go about it the right way.
Step #1: Think Like a Seller
A seller doesn’t see a $400,000 as a $400,000 offer if you are asking for $5,000 in seller paid closing costs. That’s a $395,000 net offer to a seller. If you find out the buyer who bought the house bought it for $396,000, they made a $1,000 higher offer than you did, not a $4,000 less offer.
Step #2: Think of It As Building Closing Costs into Your Loan
When buyers ask for the seller to pay their closing costs, they are essentially building closing costs into their loan. The closing costs are coming from the seller’s proceeds, so the buyer pays no money today, but likely had to pay more for the property than they would have if they didn’t ask for closing costs. Thus, think of it as making closing costs part of the purchase of the home.
Step #3: Make a Market Appropriate Net Offer
Offer strategies vary from property to property as they are highly dependent on how much you want the property, how long the property has been on the market and if there are multiple offers. When you craft your offer, make a market appropriate, net offer. Factor in how the seller will view your offer and offer what the property is worth to you.
Determine how much you would pay for the house, not considering closing costs, then add closing costs on top of that number. If the house is worth $400,000 to you and you need $5,000 in closing costs, make a $405,000 offer with $5,000 in closing costs. Remember, to a seller, that’s a $400,000 offer.
Step #3.5: Don’t Overpay!
Don’t get me wrong, I’m not encouraging you to pay more for the house than it is worth to you simply because it is a sellers market. If the house is only worth $400,000 to you if you get $5,000 in closing costs paid by the seller, then that’s the number you go with. If it’s not worth $405,000 to you with $5,000 in closing costs, don’t pay $405,000.
Step #4: Get Your Offer Accepted
An offer that includes seller paid closing costs can require a little bit of explanation to get the seller to buy into it. A personal letter is always a nice touch to help personalize your offer. Anything you can do to make an emotional connection is helpful. We’ve helped several buyers negotiate seller paid closing costs and many of those have even been in multiple offer situations. Make sure you work with a buyer’s agent who has some strategies about presenting an offer that includes seller paid closing costs.
Why Might a Seller Choose an Offer with No Closing Costs Over One with Closing Costs?
Say the seller gets two $400,000 net offers, one for $405,000 with $5,000 seller paid closing costs and one for $400,000 with $0 seller paid closing costs. Both offers will net them the same amount, $400,000. But, if there is a lender involved, the $405,000 offer with $5,000 closing costs will have to appraise for $405,000. The $400,000 offer with $0 seller paid closing costs, would only have to appraise for $400,000. If the house is aggressively priced, a seller is going to take the $400,000 offer with $0 seller paid closing costs simply because there is less chance it will not appraise.
Do You Need Help with Closing Costs to Buy a Home in Austin?
I wouldn’t let it deter you from buying a house. You might not get every home you make an offer on, but buyers who don’t need closing cost help don’t always get every home they make an offer on either. 99% of buyers we’ve worked with who have lost out on a house have said the house they ultimately ended up with was the house they were meant to find. The market is predicted to remain strong for a couple of years. Waiting until you saved up enough for closing costs might mean you are priced out of some of the neighborhoods you want to live. Ask for the closing cost help now and save yourself money in the long run.
Considering Buying a Home in Austin?
We know how to help buyers get what they want, even in strong real estate markets. If you need closing cost help or have another challenging situation, we can help. Our team of experienced buyer’s agents have a combined 58+ years of experience and there isn’t much we haven’t seen. We know how to negotiate and how to present challenging offers in a way that encourages sellers to take them. We’ll also help walk you through the process and make it as stress free as possible. To learn more about our team, check out our Austin Home Buyers page. Then call us at (512) 827-8323, email us at info@11OaksRealty.com or fill out our Buyer Survey to get started.