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How do you handle multiple offers or counteroffers that involve closing costs?

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As a first-time home buyer, you may face the challenge of competing with other buyers for your dream home. One of the factors that can affect your chances of winning a bidding war is how you handle closing costs. Closing costs are the fees and expenses that you pay when you finalize your mortgage, such as appraisal, title insurance, and origination charges. In this article, you will learn how to handle multiple offers or counteroffers that involve closing costs and how to negotiate them to your advantage.

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The Lori Bost Team

Realtor at Howard Hanna Real Estate Services, S Hills Office

1 What are seller concessions?

Seller concessions are when the seller agrees to pay some or all of your closing costs, either as a fixed amount or a percentage of the sale price. Seller concessions can help you reduce your out-of-pocket expenses and increase your purchasing power. However, they also have some drawbacks, such as affecting the appraisal value, the loan-to-value ratio, and the seller's net proceeds. Therefore, you need to weigh the pros and cons of asking for seller concessions and how they affect your offer.

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The Lori Bost Team

Realtor at Howard Hanna Real Estate Services, S Hills Office
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I am in agreement with what has been said about seller assist. I do believe that if you are in a multiple offer situation, it definitely affects your chances of being awarded the home.

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2 How to ask for seller concessions?

If you want to ask for seller concessions, you need to include them in your purchase offer. You can either specify the amount or percentage of closing costs that you want the seller to pay, or you can ask for a credit toward your closing costs. A credit is a lump sum that the seller gives you at closing, which you can use to pay for any closing costs. A credit may be more flexible and appealing to the seller than a fixed amount, as it does not affect the sale price or the appraisal value.

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The Lori Bost Team

Realtor at Howard Hanna Real Estate Services, S Hills Office
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I believe that the key to asking the seller for concessions is to talk about what is needed to get your buyer to the closing. Let them know that the buyer is well approved for the monthly payment just hasn't had enough time to save for all the closing costs. Let them know that this is just a different way of letting the buyer finance their closing costs and that some of the closing costs the seller pays may be tax deductible. If the seller is ok with the net amount, showing the seller 2 cost sheets, 1 with the net amount and 1 with the seller concessions offer usually works for me. There usually isn't much difference especially if the commission is paid on the net.

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3 How to respond to counteroffers with closing costs?

If the seller accepts your offer with seller concessions, you are in luck. However, it is more likely that the seller will counter your offer with different terms, such as a higher sale price, a lower amount of seller concessions, or no seller concessions at all. In that case, you need to decide whether to accept, reject, or counter the seller's counteroffer. You should consider factors such as your budget, your loan approval, the market conditions, and the seller's motivation. You should also consult with your agent and your lender to evaluate your options and risks.

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4 How to handle multiple offers with closing costs?

If you are in a multiple offer situation, you may have to compete with other buyers who are also asking for seller concessions or who are offering more money or better terms. In that case, you need to make your offer as strong and attractive as possible, without compromising your financial goals or limits. You can do that by increasing your earnest money deposit, shortening your contingencies, offering a flexible closing date, or writing a personal letter to the seller. You should also be prepared to walk away if the seller's counteroffer is too high or too low for your comfort.

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5 How to negotiate closing costs with the lender?

Another way to handle closing costs is to negotiate them with your lender. Your lender may be willing to lower or waive some of the fees and charges that they impose on your loan, such as the origination fee, the application fee, or the discount points. You can also ask your lender to match or beat the rates and terms of other lenders that you have shopped around with. However, you should be aware that negotiating with your lender may affect your interest rate, your monthly payment, or your loan type.

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6 How to save for closing costs?

The best way to handle closing costs is to save for them in advance. You should start saving for your down payment and closing costs as soon as you decide to buy a home. You should also get a good estimate of how much closing costs will be for your loan and your area. You can use online calculators, ask your lender for a loan estimate, or ask your agent for a net sheet. You should also budget for some extra money for unexpected costs or changes in the closing process.

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7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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How do you handle multiple offers or counteroffers that involve closing costs?

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1 What are seller concessions?

2 How to ask for seller concessions?

3 How to respond to counteroffers with closing costs?

4 How to handle multiple offers with closing costs?

5 How to negotiate closing costs with the lender?

6 How to save for closing costs?

7 Here’s what else to consider

Working with First-Time Home Buyers

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