Duplex Buyers Pose A Math Question

said on September 16th, 2013 categorized under: Buying A Duplex

duplex buyer expensesWhen a buyer writes an offer on a duplex at its list price but asks the seller to pay their closing costs, is that the equivalent of a full price offer?

Many of my buyers think it is.

But, the reality is, when a seller pays for a buyer’s closing costs, it’s the same as taking money out of the sale to purchase something for the buyer.

True, closing costs and prepaids aren’t the equivalent of a new car or smart TV, but they are expensive. And when a buyer asks a seller to contribute a portion of the purchase price toward things like insurance, recording fees, and so forth, it reduces the amount of money the seller takes home.

For example, an offer of $200,000 with 3 percent in seller paid closing costs, reduces the offer to the seller by 3 percent. In other words, this is the equivalent of an offer of $194,000, which is not a full price offer.

A full price offer, which gets the seller the net they hoped for when they listed the duplex for sale, would be list price plus 3 percent. In the example above, that would be $206,000, from which the seller would designate funds at closing be applied toward the buyers closing costs.