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Can Sellers Pay the Home Buyer’s Closing Costs in California?

Home buyers in California tend to have a lot of questions when it comes to closing costs. We’ve addressed several of them in previous blog posts. Today, we’ll answer the following question:

Can a seller pay the buyer’s closing costs in California?

The short answer is yes, a homeowner who is selling a house can contribute money to the home buyer’s closing costs. But there are some important considerations here, including the current state of your real estate market. So let’s take a deeper dive into this subject.

Sellers Can Pay Buyer Closing Costs in California

In California, as in other states across the country, sellers are permitted to pay some or even all of a home buyer’s closing costs. And that’s an important point, since these costs can add up to thousands of dollars on a typical home purchase.

This is one of several things a buyer can negotiate when making an offer on a house. In a typical real estate transaction, the buyer and seller will negotiate back and forth until they find common ground and agreeable terms.

But it’s also important to realize that sellers do not have to pay any of the buyer’s closing costs. There’s a big difference between being able to contribute money, and being willing to do so. The likelihood of it happening partly depends on current real estate market conditions.

Housing Market Conditions Play a Role Here

Sometimes, home sellers in California will offer to pay some of the buyer’s closing costs in order to entice more offers. This happens more often in a slower real estate market, where sellers have to do more to attract offers.

In such times, a homeowner might be more willing to offer a “seller concession” as it’s known. Sometimes these offers are written directly into the real estate listing, and they might also be featured on the yard sign. For instance, you might see a listing or sign that says: “seller will pay 3% toward buyer closing costs.”

But there’s a flip side to this coin as well.

In a more competitive real estate market, where sellers are more likely to receive multiple offers from buyers, they tend to be less willing to pay buyer closing costs. The simple reason is they don’t have to. If you receive a dozen or more offers within the first week of listing your home, you can sort through them to find the best one.

In a fairly balanced real estate market, or in a market that favors buyers over sellers, it never hurts to ask for a closing cost contribution. But in a competitive market, it could actually work against you. When sellers have more bargaining power, they might be inclined to reject offers that ask them to pay closing costs.

This is where your real estate agent’s market knowledge will come in handy. An experienced agent will have a pretty good idea how sellers might react, based on the terms and conditions you’re asking for. So be sure to seek your agent’s input before asking the seller to pay your closing costs.

How to Ask for a Seller Concession

Asking the seller to pay some of your closing costs is fairly straightforward. This kind of clause can simply be added to the purchase offer.

Once both parties have signed it, the purchase offer becomes a real estate contract. So anything written into that contract becomes a requirement for the transaction, including any concessions.

Real estate contracts and purchase agreements are typically boilerplate and template driven. As a home buyer, you would simply fill in the appropriate blanks regarding the purchase price, closing date, and other details of the transaction. You could also include some verbiage asking for a seller concession.

For example, you might include a clause that says: “Seller to pay buyer’s closing costs, pre-paids and miscellaneous fees, not to exceed __% of the purchase price [or a specific dollar amount].”

Summary of Key Points

We’ve covered a lot of information in this article, so a recap is in order:

  • In California, sellers are allowed to pay for some of the buyer closing costs.
  • But that does not mean they are required to do so.
  • Contributions from sellers are more common in a slower real estate market.
  • They tend to be less common in a competitive market (multiple offers).
  • A buyer can ask for such a contribution when submitting a purchase offer.
  • Ask your agent how it might play out in your real estate market.

Need mortgage financing? Located in the San Francisco Bay Area, Bridgepoint Funding serves home buyers all across California. We offer a broad range of mortgage products, including conventional, FHA and VA. Please contact us if you have mortgage questions or would like to apply for loan.

Mike Trejo

Mike Trejo is a Bay Area mortgage broker with 20+ years of knowledge and experience.

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