Asking the Seller to Pay Your Closing Costs in the Bay Area

Most home buyers in the San Francisco Bay Area encounter closing costs when purchasing a house. These costs can include both mortgage and third-party fees, and they can add up to thousands of dollars.

In the Bay Area, sellers can pay for some or all of the buyer’s closing costs, as long as the buyer’s mortgage program allows for it. But you’ll want to take local market conditions into account before making such a request.

1. Home sellers in the Bay Area can contribute to a buyer’s closing costs. This is often referred to as a seller concession or contribution.
2. The amount a seller can pay is limited by the type of mortgage loan and the buyer’s down payment. Limits typically range from 3% to 9% of the purchase price.
3. Local real estate market conditions can greatly influence whether it’s wise to ask for seller contributions. It’s more common in slower markets.
4. In a hot housing market where sellers receive multiple offers, asking them to pay closing costs could make your offer less attractive.
5. An experienced agent can help you navigate these decisions, based on current market conditions, supply and demand, and their past experiences.

Sellers Can Pay Some of the Buyer’s Closing Costs

In a typical real estate transaction, Bay Area home sellers can contribute money toward the buyer’s closing costs. They can typically pay anywhere from 3% to 9% of the buyer’s closing costs, depending on the mortgage program.

The maximum amount will depend on the type of mortgage loan being used and the size of the borrower’s down payment.

• Federal Housing Administration (FHA) loans typically allow seller contributions up to 6% of the sale price.
• Conventional home loans (that are acquired by Fannie Mae or Freddie Mac) often allow sellers to pay 3% to 9%, depending on the loan-to-value ratio.

Bay Area home buyers can choose whether or not they want to ask for a seller contribution — just like the seller can decide whether or not they want to pay it.

In theory, there’s nothing wrong with a buyer making such a request. But in a hot real estate market, it could work against you. It might cause the seller to dismiss your offer for one with fewer “strings” attached.

It’s Not Always Advisable in the Bay Area

So, should you ask a seller to cover some or all of your closing costs? This will largely depend on two factors: (1) current real estate market conditions, and (2) the overall strength of your offer.

• Hot market: In a more active real estate market, it’s usually less common for a seller to pay the buyer’s closing costs — and for obvious reasons. With multiple offers pouring in, sellers don’t have to go “above and beyond” to accommodate an individual buyer. In this scenario, the seller has more negotiating leverage.
• Slower market: In a slower housing market (with plenty of homes for sale but fewer buyers), seller contributions are generally more common. In a sluggish market, you might even see for-sale signs that say “seller will pay closing costs” or “seller concessions available.” In this scenario, the buyer has better negotiating leverage.

These are the polar opposites of real estate market conditions. But there’s a middle ground as well, when the local housing market is more balanced and doesn’t strongly favor either party.

What the Negotiating Process Looks Like

The process of negotiating a seller concession can vary from one transaction to the next. But it usually follows a specific sequence of events that looks something like this:

1. Buyer and agent decide to request a seller contribution and determine the amount allowed by the mortgage program.
2. Agent prepares the purchase offer, including a seller‑paid closing cost line item or addendum specifying the dollar amount or percentage.
3. Buyer submits the offer to the seller (often via the seller’s agent), along with any other contingencies and disclosures.
4. Seller reviews the offer and either (A) accepts it as written, (B) rejects it, or (C) issues a counteroffer by adjusting the price, contribution amount, or other terms.
5. Buyer and seller negotiate back and forth on price and concessions until both sides sign an accepted purchase agreement.
6. Mortgage lender reviews the signed purchase agreement and verifies the seller contribution meets program limits.
7. Lender issues a Loan Estimate and later a Closing Disclosure, showing the final closing costs and seller credits.
8. Buyer and seller complete any remaining contingencies, such as a home inspection or title review.
9. Prior to closing, the lender confirms that seller credits are correctly applied and that the net proceeds worksheet reflects the seller’s payment.
10. At closing, the seller’s funds are applied toward the buyer’s closing costs, and both parties sign final documents to transfer ownership of the property.

Seek Your Real Estate Agent’s Advice

This is one of many areas where it helps to have a real estate agent on your side.

An experienced agent can bring you up to speed on current market conditions. They can tell you when it makes sense to ask a seller to pay your closing costs — and when it might work against you.

An active real estate agent will deal with purchase offers each and every week. It’s a regular and recurring part of their job. So they usually know the best way to play it, in terms of offer requests and conditions.

But at the end of the day, it’s up to the home buyer to decide what goes into the offer. There are no hard-and-fast rules about what you can and cannot ask for, aside from the mortgage program rules mentioned earlier.

Related Advice from Bridgepoint Funding

Bridgepoint Funding maintains one of the largest collections of articles and tutorials geared toward home buyers in California. Here are some additional resources that relate to this particular topic.

Average Closing Costs for Buyers
This guide explains what closing costs are, where they come from, and how you could reduce your out-of-pocket expenses when buying a home in California.

How to Make an Offer on a Home
This in-depth article walks you through the various steps and considerations when making an offer on a house. These strategies can increase your chance for success when house hunting and negotiating.

How to Negotiate With the Seller
When you submit an offer on a house in the Bay Area, you have an opportunity to negotiate everything from the sale price to the closing date. Here are some important considerations to keep in mind.

A Step-by-Step Guide to House Hunting
This guide explains some of the most important strategies for California home shoppers, including mortgage pre-approval, local market research, price analysis, and more.