Expert: liznarr - 2/16/2008

Question
I know that by law in Georgia a seller can be asked to pay up to 3% towards closing costs. In today's market, how much closing costs are sellers typically paying in western Georgia for homes in the 70K price range? Are they paying the full 3%?

Answer
Hi David,

Assuming that lenders and closing agents in western Georgia charge closing costs similar to those in SC where I work, I am detailing below for you typical SC closing costs that a PURCHASER of a $70,000 home (and assuming a 100% loan) could expect to pay:

Origination Fee (1% of LOAN amount, not Sales Price),
but assuming a 100% loan in your case ----------------------   $  700

Underwriting Fee -------------------------------------------       300

Flood Cert -------------------------------------------------       30

Lender Title Insurance -------------------------------------       275

Attorney Fees to close transaction ------------------------        575

Recording Fees --------------------------------------------         30

Survey ----------------------------------------------------        300

Appraisal and Credit Report -------------------------------        295

TOTAL -----------------------------------------------------    $ 2,505

As you can see, the total above of $2,505 is more than 3% of a $70,000 sales price.

There is no steadfast rule of what to pay when a Seller is asked to pay all, or help with, a Purchaser’s closing costs.  In theory, however, a good listing agent will have prepared a Seller in the $70,000 price range to expect to be asked to pay some or all of a Purchaser’s closing costs.  The property is then priced accordingly – building in an amount to pay closing costs of a Purchaser when asked.  If the Purchaser does not ask, the built-in amount for closing costs can be used for “play” when negotiating a sales price.

If the above example were followed, a Seller might then agree to pay closing costs for a Purchaser on a FULL PRICE OFFER.  If an offer less than full price were to come in, that’s where negotiation comes into play.

Closing costs paid by a Seller are not “required” by law to be paid by a Seller, but most Purchasers in this price range need help from a Seller to pay all or some closing costs, as the Purchaser may not have that amount in savings.

What many sellers agree to do when paying a Purchaser’s closing costs is to add all of part of the total amount of closing costs to the sales price.  When closing costs are added TO the sales price, the property would just need to appraise for the increased sales price amount.

I hope the above is helpful to you.  Feel free to write again if you have additional questions.

Regards,
Elizabeth