You’ve found the home of your dreams, and the money you are spending covers everything from the actual purchase price to closing
costs. Homebuyers often feel they can’t afford to spend one more dime and could use a break. Is there a light at the end of the home purchase tunnel without breaking the bank?
The answer might be closing cost credits. It’s a credit given from the seller to the buyer at the time of closing. Closing cost credits may also be referred to as seller concession. This seller concession can either be agreed to at the time of ratification of the contract as a way for the buyer to decrease their closing costs, or the seller concession can be agreed to during the home inspection negotiation as money given instead of asking the seller to make repairs. In either case, the important thing to remember is that the credit given by the seller to the buyer cannot exceed the total buyer’s closing costs at settlement. When a buyer asks for credits from the seller, it is up to the seller whether to accept the offer. The home inspection will often influence the amount that is requested. For example, if a roof needs repair or there are plumbing issues, those costs will be higher than some drywall or replacing a garage door. There may be some negotiation or a counteroffer, but once an agreement is made in writing, the credits will be taken from the final sale.
SAMPLE SCENARIO FOR HOME PRICED AT $400,000:
| CASH NEEDED TO CLOSE | |
| Total closing costs (transfer taxes, title costs, processing, etc) | $12,000 (3% of purchase price) |
| Down payment | $80,000 |
| Deposit (earnest money) | ($20,000) |
| Seller credits | ($3,000) |
| TOTAL | $69,000 |
Closing costs can be expensive. However, closing cost credits are a good tool to keep money in your buyer’s pocket for them to have available after the closing for the many hidden costs that pop-up for a new home owner. Determining the right amount of a closing cost credit to negotiate is tricky, but it’s also another way to show off your expertise.
A seller can also benefit from offering a closing cost credit. If their property is a fixer-upper opportunity, they may need to offer some inspiration to your buyer to agree to the purchase, especially if these repairs influence the home inspection. These credits are a great way for the seller to remain in the deal without offering money out-of-pocket.
Regardless of the agreement or amount, buyers should understand that they will not walk away from the closing with cash in hand. That money can be used toward their actual closing costs, but the difference will not leave the closing table. 
At Highland Title + Escrow, we want all parties to have a closing experience that is cause for celebration. Efficiency and experience allow buyers and sellers alike a chance to sit back and enjoy the process. If your clients are interested in learning more about closing costs as a whole, check out this great resource that explains each fee. You can also contact us at 703-723-3300.