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Photo to right: Lynlee Kane w/ clients

We frequently close transactions in which the buyer offers a higher price than the list price in exchange for the seller paying buyer closing costs. Most of the transactions of this type actually result in the seller netting less than if they accepted a full price offer without concessions. We recognize that many buyers are cash poor and need to have the seller pay closing costs.

When writing your contracts please consider that the higher price will result in the seller paying higher excise tax, real estate commissions, escrow fee and title premiums.

For example, a very common $10,000 seller concession (offset by increasing the sales price) will cost the seller $778 (6%, 1.78% excise) in excise tax and commissions alone.

Sellers usually do not consider these costs until they come to the closing table and actually review the numbers on the settlement statement. This obviously creates an awkward situation for the listing agent who may have told them it was a wash.

Over the year, we have documented only one case where the listing agent addressed the increase in excise tax via a commission credit. Only about half the time we receive addendums stating that commissions will be based upon the lower or original list price.

While assisting 100% financed borrowers with closing costs is helpful in making a sale, make certain your sellers understand that it may cost them more.

• Consider Excise tax at 1.78% in most jurisdictions
• Consider the additional commissions at 6%
• Consider that title and escrow premium may also increase

Wishing you all the best in smooth closings!