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It is closing costs and how important closing costs are to your client.
When it comes to closing costs, the lender will be the one that's typically handling
all of those fees.
Most of the closing costs come from the lender.
So you, as a real estate agent, don't have to worry about that there; however, let me
give you an example.
Let's assume your client is the buyer.
Sometimes your buyer may not have enough money to close a deal because he doesn't have the
money for the closing costs.
You're showing a buyer property.
You got a buyer.
Yay, you're happy.
It's your first buyer, your first customer, your first client, your first principal.
It's going to be your first time out in the field.
So, you're out showing them property.
You guys are having a good time and you're getting to know each other and you make the
offer.
Offer gets the accepted.
You open escrow.
"Yes, life is good.
Everything's going good."
Your buyer sits down with the lender.
The lender looks at your buyer and reminds your buyer that the buyer is getting an FHA
loan.
So, your buyer is getting an FHA loan, which requires 3.5% down payment.
Now, let's assume the house is $600,000.
Do the math.
600,000 times 3.5%.
We're going to put that total here.
Buyer has to come up with that money.
Now, on this side, put it on the screen, we're going to have the closing cost required.
Now, what is the closing costs?
The closing costs are fees needed to be paid to get this transaction closed.
We're talking fees like the lender's fees.
We're talking fees like the escrow fees.
We're talking title fees.
We're talking all kinds of fees.
That goes in this pot over here.
You got your down payment of 3.5% and you've got your closing costs fees over here.
Two complete separate pots.
Now, how much are the typical closing costs when it comes to this pot over here?
Typically, it's 3% of the purchase price, typically.
When you gather all the fees involved in buying in house, it comes up to about 3%.
That goes over here.
Again, Reminder, over here 3.5% for the down payment.
Don't get them confused.
Now, many cases the buyers don't have the entire 6.5%, 3.5 and the 3%.
They have the 3.5 for down payment, but they don't have the closing cost amount.
So, what do they do?
What can we do?
Think about that.
The buyer doesn't have enough money to close the deal.
What the buyers can do is say, "Hey, seller."
They can request from the seller.
"Hey, seller, I'm going to make you this offer of $600,000, but the only way I can go into
an escrow and close this deal is if you help me out by paying my closing costs," whether
it'd be paying all of it, whether it be paying 1% of it, whether it be paying 2%, whether
it be paying the whole thing, the whole 3%.
The buyer's actually going to ask the seller, "Hey, seller, I'm going to make you an offer
on your property.
I'm going to give you $600,000, exactly what you want, but the only way I can close the
deal is if you help me out by paying some of my closing costs.
I'm going to give you money on you house, but you have to give me money for my closing
costs."
It almost sounds unusual, but that's how it works.
Now, let's discuss this.
When is that going to be feasible?
When it is feasible, when is it reasonable for a buyer to ask a seller, "Hey, seller,
how you doing?
Would you mind giving me back some money?
Would you mind paying my closing costs?"
What type of market do we have to be in for that to be reasonable? that the seller's going
to say, "Yeah, okay, I'll give you the 3% you need to close this deal."
"Yeah, I'll give you back money."
The seller's saying to the buyer, "Yeah.
Here, I'll give you some money to close your deal."
What type of market do we have to be in for that to even occur?
That's right, a buyer's market Now, what is a buyer's market?
A buyer's market is when there's much inventory out there, there's so many houses for sale,
and a seller is having trouble selling their house.
They're desperate and they're saying, "Hey, whoever makes me an offer I'll pay their closing
costs."
Whenever there's a buyer's market, the buyer has the advantage.
So closing costs, they're there, they exist.
The seller has their closing costs.
The buyer has their closing costs.
Now, it's a matter of who's going to pay them.
Is the buyer going to pay them or is the seller going to pay them?
This is a great negotiating time for the real estate agent.
If the buyer doesn't have a substantial amount of money to close the deal, they're short
on their closing costs.
As an agent, you can just say, "Hold on, buyer, we might still have an opportunity to buy
a house.
We'll just request that the seller pay your closing costs."
Are you with me?
Does that make sense?
This is the deal.
If the buyer is short and the buyer says, "You know what?
I don't have enough money.
I'm short on cash.
I got enough for the down payment, but I do not have enough for those closing costs."
You as an agent, knowing the market is slow, can say, "Don't sweat it, buyer.
As long as you got your down payment that the lender requires, let me request the closing
costs to be paid by the seller.
Now, get in my car and let's go see some property."
Let's talk about today's economy.
Is it slow?
Is it fast?
What's going on?
Does the buyer have the advantage?
Does the seller have the advantage?
You tell me.
Because there is no inventory, the seller has the advantage, so the seller says, "Hey,
I got something everybody wants."
So, when there's very little of something, it's worth a lot more than before.
Gold, a little bit of gold, worth a lot.
Little bit of diamonds in the world, worth a lot.
When there's a very few amount of homes for sale, worth a lot.
The value increases.
In today's market, every house for sale typically has multiple offers.
You think the seller's going to have to pay any of these closing costs for any of these
people?
No.
Hope that makes sent to you.
So, please remember, depending on the market, you might be able to assist your buyer in
buying a house even though they don't have enough money for the closing costs.
Who's going to pay for it?
Who can you request pay for it?