Cash Purchases: Why A Seller Paying Your Closing Costs Only Complicates Things
Believe it or not, cash deals are still happening quite frequently in Northern Virginia, even in the higher price ranges. I’ve had a few clients recently ask me about whether they could ask for a subsidy from the seller to apply towards their closing costs, while the answer is of course yes – you can ask for anything you want – I don’t think it’s necessarily a good negotiating point and often times just complicates something that should be very simple.
Look at from this angle: as a cash buyer, you have this pool of money you plan to use for the purchase, your closings costs, inspections, etc. It’s one pot of money, a sum total regardless of how you break it out. You’re worried about the bottom line number, what the whole thing will cost you from start to finish. Sellers are looking at their bottom line NET as well, after the sale price, loan payoff, commissions, and expenses to sell. If both parties are worried about their net, why not keep the contract in simple net terms?
If you were applying for financing and using a mortgage to buy the property, you’d be negotiating your down payment and closing costs in addition to the sale price, since both things are based on the sale price. For example, if you’re looking at a property listed for $425,000 and you’re putting down a 20% down payment but have no more extra cash for closing costs, you’d offer $425,000 + a $10,000 subsidy towards your closing costs – a NET offer of $415,000 to the seller. You’re more cash conscious because you have a limited pool of funds for the purchase. However, if you’re a cash buyer, why not just simply offer $415,000 and keep it simple? If you want them to pay your closing costs, why not just factor that into your sale price offer? Sellers have to pay commissions and taxes on the GROSS amount, so you’re saving them a little bit of money by giving a net offer, also helping to make your offer more attractive.
Does that make sense? Ask me if it doesn’t!