How much are you paying of the buyer's closing costs?

Question

I am wondering how much flippers are paying of the buyer's closing costs. Also, do you pay any of the commission to the buyer's agent? Just wanted to know what I can expect to put out there for a quick resale. Any response would be greatly appreciated.

Thanks.

Chris Clothier · Answer

Jarred -

I'm probably not the traditional seller you are looking for when asking this question, but in the past, I would cover all of the closing costs that their lender would let me cover and often part of the agents commission as well.  Of course, my strategy was to add some unexpected features and price at the very top of the market.  So putting in those benefits and allowing the buyer to essentially wrap those costs into their mortgage for 15-30 year write down.  Seemed to work to my advantage on most deals and attracted buyers.

Jarred S. · Answer

Thanks for all the replies everyone. It actually did change my thinking on some of the expenses I was assessing.

J Scott, I attempted to email the spreadsheet to the email listed on your website and got a delivery failure report. Anyways, it would be appreciated if you were to still take a look at my fixed costs spreadsheet. It will look a bit familiar to you anyways.

I uploaded a file in the FilePlace here on the website. It is the spreadsheet I am using to assess my fixed costs. Please read the description for a bit more background and understanding. The comments inside the spreadsheet will help you understand my thinking behind each cost. PLEASE let me know what you think. Rip it apart or tell me I am a genius (not expecting that one).

Thanks again everyone.

Mike Denham · Answer

I'm going to say it's all about your market. Here in BR, remodeled homes always sell fast and for the most per foot compared to the comps. If it's remodeled an not in an outlying area, then closing costs aren't necessary most of the time. There are other parts of our market though that are driven by 103% financing from Rural Development and those sellers almost always offer 3-5K in closing costs. So, I'm inclined to agree with J Scott and say it depends on where you're selling compared to the rest of the market.

J Scott · Answer

I'm happy to take a look...

I think mine is posted around here on BP somewhere, as well...

Jarred S. · Answer

Great feedback. I am in the process of assessing all the costs of our first rehab project. I developed a spreadsheet to plug numbers in and see how much to offer, how much room for profit, how much I can pay towards closing costs, etc. After reading all your responses I think I was taking off at both ends by selling 10% below market AND covering a good bit of the buyers closing costs at resell. This leaves me less room for profit, or in my maximum purchase price. I appreciate your feedback and keep it coming. Also, if anyone has time I would be so appreciative if I can send out my spreadsheet to some of you for critique. Please, let me know if any of you are willing.

Thanks again.

Eric M. · Answer

I think there are different customs in different areas.  I rarely get asked to pay closing costs however here the seller pays for title ins.
I personally don't like doing it on principal (buyers who can't afford closing costs but buy anyway are part of what got us in this mess) but I have paid in some cases as long as my net stays what it needs to be.
I use a flat fee listing service and I pay the buyer's agent 2% (that discussion has been had here several times...everyone disagrees that 2% can work well but they won't actually try it to really find out).  My attorney handles the sales process with the buyer's agent.  I want nothing to do with it after the contract is signed.

J Scott · Answer

I'll generally pay as much in closing costs as the buyer asks/needs, though -- like Chris -- I'm generally priced at the top of the market so there is room to make these types of concessions.

I'll always pay 3% to the buyer's agent, and often will give the agent $500-1000 in bonus if they do a good job (btw, the definition of "good job" is "move out of the way and let me handle everything").

Jim S · Answer

I pay 2.5% to the Buyers agent and split T&R costs. Most buyers are asking for 3% closing cost help. I seems to be an automatic request that is put into all contracts by Realtors. With appraisals starting to become an issue, I would rather reduce the selling price of the home by the 3% instead of giving the $$ in the form of closing cost help. 
My Realtor lists me as the point of contact for buyers agents when they call about getting access to my houses. As soon as I receive my 1st contract I always tell the other agents that are calling that they better submit a strong contract at this point. It cuts out the BS. The closing cost help is the 1st thing to be dropped.

How much are you paying of the buyer's closing costs?

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