What are closing costs? Part 4: I Can’t Afford Closing Costs

Posted on September 30, 2011 by Ricky Beach

What are closing costs? Part 4: I Can’t Afford Closing Costs

Part four of this five part series on closing costs in real estate transactions covers the inability to pay for closing costs. This series is prefaced with the fact that many closing costs are negotiable and customary costs can differ from city to city. This series is a general overview of what to expect at the closing table. To learn about what closing costs are go to “Part 1: Recurring Closing Costs”, “Part 2: Non-Recurring Closing Costs”, and “Part 3: The Bottom Line”.

Hopefully by now you’ve learned what closing costs are and what you can expect to pay at closing. For many, the total costs of getting into a home are too great to make homeownership a reality even though the monthly mortgage payments are not a problem. I’ve covered some of these ideas before in “Why won’ the seller accept my offer?” but here they are again.

Option 1: Save up

While the decline in the real estate market and historically low interest rates have made it a great time to buy you may want to wait a bit. Yes, a real estate agent just said it may be in your best interest to not buy right now. Take some time to plan out your budget and add in a savings for closing costs. Many potential buyer already do this for their down payment so why not be financially responsible and do the same for your closing costs.

Option 2: Ask for it from the seller

Okay… You’ve found the perfect home and don’t have the time to save up for closing costs. Try a seller concession. Due to the influx of first time home buyers the closing cost concession has become more prevalent. A closing cost concession is where the seller will contribute a certain amount or percentage to the buyer’s closing costs so they don’t have to pay for it. Great! Free money! Well, there is major downside. The seller will add this loss into their net amount and count it against you. Let’s use this example.

Buyer A offers $195,000 for a property that is listed at $200,000 without asking for a closing cost concession. The net amount the seller will receive at the close of escrow is $180,000.

Buyer B offers $200,000 for the same property and asks for a 3.5% closing cost concession. The net amount the seller will receive at the close of escrow is $178,000.

Buyer B just lost the house because of his closing cost assistance. Remember, even in non-multiple offer situations the seller will be looking at your net offer.

In order to overcome the lower net offer of a closing cost concession some buyers will add the amount of the concession to their offer price. This is a quick fix but you need to remember that you’re going to end up paying more on your loan because of it. More on this in a later blog post.

Option 3: Move the money around

Some lenders will allow for the down payment to be paid as a gift from a family member or employer. The money you had saved up for a down payment can now be used for your closing costs.

Check back for Part 5: Seller Closing Costs

Still looking for the right home? Have questions on how the home buying process works? Contact Ricky at (775) 750-1437 or Ricky@Resnv.com

Ricky Beach

Managing Broker|Realtor�|CDPE�|SFR�

| Office:(775) 313-9600 |� Cell:(775) 750-1437� | Fax:(775) 562-4779� |

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To reduce liability from the sue happy: This is not intended to be a complete list of your closing costs. Your actual fees may be different as negotiated in your contract. Read your Purchase agreement and your lender’s documents carefully and make sure you understand the terms. You’re advised to consult �legal counsel, a CPA, or financial advisor.

Wordless Wednesday: The Boys of Fall

Posted on September 28, 2011 by Ricky Beach

Ricky Beach

Managing Broker/Realtor� CDPE, SFR

| Office:(775) 313-9600 |� Cell:(775) 750-1437� | Fax:(775) 562-4779� |

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Facebook, Twitter, Home Buyers, and Sellers

Posted on September 26, 2011 by Ricky Beach

Social media has completely revolutionized communication… mostly for the better.

As humans, we’re geared toward community rather than isolation. In the old days happy birthday greetings, family announcements, and feelings were communicated through phone calls, snail mail, or actual face to face conversations.� In the present, communication has gone public with social networking sites like Facebook and Twitter. While there is nothing wrong with sharing your life with friends and co-workers through “tweets” or “posts” you need to be careful.� I’m not talking about revealing future vacation dates that can give thieves an opportunity to have a free run through your home (though it isn’t wise) but revealing your emotion to a home sale or purchase.

As Realtors(R), one of our jobs is to arm buyers or sellers with reliable information on purchasing or selling their home and the tech savvy among are using the internet to do it. As a transaction unfolds this may include research on the opposite party through social networking sites.

Your post or tweet, “Offered on our dream home. Will do anything to get it.” or “Offered on a home way under our budget. Pray it goes through.” just may have popped up on the opposing agent’s radar. Think you’re okay because your� profiles are set to private? Well, your friend just reposted or re-tweeted your message on her public profile. �You may be able to control what you put into cyberspace but you can’t control others.

Remember, almost everything is searchable on the internet including the hope you have for your buying or selling a home. �Do yourself a favor and keep it underwraps until you close. You never know who is looking.

For more information on buying and selling a home in Reno or Sparks, Nevada email me at Ricky@Resnv.com or call (775) 750-1437.

Ricky Beach

Managing Broker/Realtor� CDPE, SFR

| Office:(775) 313-9600 |� Cell:(775) 750-1437� | Fax:(775) 562-4779� |

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What Are Closing Costs? Part 3: The Bottom Line

Posted on September 23, 2011 by Ricky Beach

What are closing costs? Part 3: The Bottom Line

Part three of this five part series on closing costs covers what you can expect to pay at the closing table. This series is prefaced with the fact that many closing costs are negotiable and customary costs can differ from city to city. This series is a general overview of what to expect at the closing table. The breakdown of your closing costs can be found at Part 1: Recurring Closing Costs and Part 2: Non-Recurring Closing Costs.

As we’ve learned in the previous closing cost posts the total closing cost amount is a combination of recurring and non-recurring closing costs.

Buyer: “So my total out of pocket costs to buy this home are recurring closing costs + non-recurring closing costs. Great let me get my checkbook.”

Agent/Lender: “Well, the total amount of closing costs you have accumulated will be paid at the closing table but there is another payment we need to add to your list… the down payment.”

Barring special financing or a VA loan you will have to provide a down payment for your lender to give you a loan. In FHA, the amount is 3.5% of the purchase price. For conventional loans� on primary residences or second/vacation homes the amount can range from 10% to whatever higher amount you’re willing to put down.

For this example, we will use an FHA loan.

The purchase price for 123 Main Street is $100,000. You should have already put down some amount of earnest money so we will use $1,000. Again, your closing costs will vary depending on what you have incurred but we will say you’re total costs came to 3.25% of the purchase price. Below is what you will need to pay at closing.


Down Payment	$100,000 x 3.5%	$3,500
Closing Costs	$100,000 x 3.25%	+ $3,250
Earnest Money	$1,000 already deposited	– �$1,000
	Total to Pay at Closing	$5,750

I know what you’re thinking, “Just tell me what I have to pay instead of giving an example.” The fact of the matter is there are many variables and deciding factors that go in to what you’re total closing payment will be.

To get a more detailed look at your potential closing costs contact your lender or real estate agent and ask for a Good Faith Estimate or Estimate Net Sheet.

Still confused or wondering what this all means for buying a home? Feel free to call or email me with your real estate questions.

Check back for Part 4: I Can’t Afford The Closing Costs