Many sellers helping pay closing costs

Q: I agreed to sell my home last month. As part of the contract, I agreed to provide the buyer with a $7,000 credit when the deal closes to help pay for her mortgage points and other closing costs. The preliminary closing statement says her closing costs will total only about $5,500, but her lender will not let me give her a check for $1,500 to make up the difference. What can I do now?

A: Many sellers in areas where prices have cooled are offering to pay part of the buyers’ closing costs. It often is a wise marketing decision that can make a house sell faster.

Many banks, however, prohibit their home buyers from accepting a seller’s credit that exceeds the amount of the buyer’s actual closing expenses. Several lenders also require that any seller-paid closing credits be used to cover a buyer’s one-time-only, “non-recurring” costs – such as upfront loan fees or title insurance.

Because the bank won’t let you make up the $1,500 difference by writing a check to your buyer, the simplest solution might be simply to drop the agreed-upon asking price by the same amount.

To illustrate, let’s say you have agreed to sell your home for $200,000 and that you have also agreed to give the buyer a $7,000 closing credit. Because the buyer’s closing costs will be only $5,500, you could simply amend the sales contract to reduce the price to $198,500 and the credit to $5,500 – making up for the $1,500 difference.

That should satisfy the bank’s requirement that your seller-paid closing costs ($5,500) do not exceed the buyer’s own closing costs. It could let your buyer complete the transaction without scrambling for extra cash while still allowing you to reap the same profit you initially would have received.

Discuss your options with your real estate agent. If you’re not using an agent, consult with a real estate attorney.