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HOMES BY MINOO's Personal News |
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Asking the Seller to Pay
Closing Costs... |
Some aspects of real estate become very routine to real estate agents, who deal with the same issues over and over. However, these same issues are sometimes new to buyers and sellers - and not immediately understood.
This situation came up recently between a buyer and seller.
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Asking the Seller to Pay Closing Costs
A home was listed for sale at $210,000. The excited buyer made an offer to buy the home at $203,000, asking the seller to pay all of their closing costs.
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The seller scratched his head. How much are closing costs, anyway?
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Closing costs can vary widely, mostly dependent upon the cost of the mortgage loan. The "smart" thing for the seller to do is make a counter-offer and place a limit on the amount of closing costs he will pay on behalf of the buyer. Otherwise, how can the seller anticipate how much he will "net" from the sale of his home?
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In this case, the seller countered with a price of $208,000, agreeing to pay $5000 of the buyer's closing costs.
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This time the buyer scratched his head.
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"That's no deal," he complained to his Realtor. "The seller just took my offer and added in the closing costs."
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The buyer figured he wasn't getting anything "free" at all. By adding the closing costs to the purchase price, most of those costs would be a part of the loan. Instead of getting his closing costs paid for free, he would be paying them over the life of the mortgage loan.
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"That's exactly how it works," explained the Realtor, smiling patiently.
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"Suppose the seller had accepted your initial offer of $203,000," continued the agent, "and your closing costs had actually been $5000 -- you would still have been paying most of those closing costs over the life of the loan. The difference is that - if you had paid your own closing costs - you could have got the house for $198,000."
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Counteroffers went back and forth until the final figures were agreed upon.
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When a seller pays your closing costs, what makes it a "deal" is that it takes you less cash to buy the home. You don't "save" any money -- you just save it for now..
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...and that can be very important, especially if your funds are limited.
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Location, Location, Location
What Does That Mean? |
Location, Location, Location -- What Does That Mean?
When a homebuyer is thinking of buying a home, they sometimes wonder aloud about the most important thing they should consider. Of course, you need to find a home that provides everything you need in a home, but after that?
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A Realtor often replies with the phrase, "location, location, location."
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It's become an almost hackneyed phrase, but it still has meaning.
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Where a home is located is the most important factor in it's value -- both now and in the future.
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For example, suppose you are buying a new home and have a choice between two identical houses. One is located close to the center of the tract and the other backs up to a potentially busy street. The house in the center of the tract will have a greater value.
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On the other hand, you may be able to buy a four bedroom house on the edge of the tract for the same price it would cost to buy a three bedroom house on the interior of the tract.
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And so on...
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In an old-fashioned neighborhood with square blocks, a house in the middle of the block will have more value than an identical house located on the corner. Corners have more traffic.
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A single family house in an area where there are mostly other single family homes will retain its value better than a similar home in an area where there are apartments, condominiums, or businesses -- not because apartments and condo are "bad" -- but because the neighborhood is fairly homogeneous. All the properties are similar to one another. .
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.And so on...
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A home in a thriving vibrant community will have more value than a home in a city where industries are failing, the roads are uncared for and schools are on the decline.
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All other things being equal, a home in a desirable location is more valuable than an identical or similar home in a less desirable location.
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So when deciding what you "need" in a home versus what you "want" in a home, sometimes it makes sense to settle for what you need in a desirable location -- providing resale value is important to you.
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That's all real estate agents mean when they say "location, location, location." Location is important because it is the greatest determining factor in value.
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