What are Closing Cost Credits Issued by Sellers? Also known as “Seller Paid Closing Costs” or “A Seller’s Concession”

Closing cost credits are a way for sellers to help buyers finance certain closing costs – such as title insurance, appraisal fees, and pre-paids.  Pre-paids refers to home owners’ insurance and real estate taxes.  Typically a lender will not permit a credit for home inspections.

Sellers may choose to offer closing cost credits for a variety of reasons. For example, if a property has been on the market for a while and the seller is having trouble finding a buyer – they may offer these types of credits as an incentive to buyers. Another reason could be that the property needs repairs or updates, so a seller may offer closing cost credits to help the buyer cover the cost of those repairs. It’s worth noting that there are not many restrictions on them, meaning sellers can usually offer whatever amount they see fit. If a Buyer is getting a mortgage, the Buyer will need to consult with their lender for permitted closing costs credits.  If a lender will not permit a credit, the parties could consider reducing the purchase price as well.

The Legalities:

If closing cost credits are agreed upon, then they must be included in the purchase and sales agreement. Both parties should review the terms of the credits with their real estate attorney to understand them fully. This includes the amount of the credit and when it will be credited. Always consult with an experienced real estate attorney before making a decision about closing cost credits – whether you’re the buyer or seller. Give Riley & Gutman a call today to go over your options.