Are There Disadvantages to the Seller Paying the Buyer’s Closing Costs?
As a seller, you could pay for the buyer’s closing costs — but should you? We detail the dos and don'ts of paying for a buyer’s closing fees as the seller.
Selling a home doesn’t come cheap.
Industry experts estimate that sellers can expect to pay anywhere from 6% to 10% of their home’s purchase price in closing costs when it’s time to sell. So if your home sells for $450,000, you could spend anywhere between $27,000 to $45,000 in seller fees.
To top it off, buyers sometimes ask sellers to pitch in for their closing costs, too — another 2% to 3% of the sales price. Should you consider it? And if you do, what are the downsides to paying for the buyer’s closing costs as the seller?
To explore the potential drawbacks of paying for buyer closing costs as the seller, we spoke with Tara Limbird, an Arkansas-based agent who heads a team of real estate pros recognized as the top one-half of 1% of Realtors®. Limbird walked us through when you may want to consider agreeing to a seller concession and discussed the nuances of paying for a buyer’s closing fees.
Reduce Closing Costs With a Cash Offer
HomeLight’s Simple Sale platform provides you an all cash offer for your home, helping you avoid both a listing agent’s commission and reduce closing costs.
Buyer vs. seller closing costs
The buyer and seller generally pay for the costs they each incur during the settlement process. These are examples of what the real estate industry typically considers buyer and seller closing costs:
Typical buyer closing costs
- Loan fees, including the origination fee and discount points
- Lender’s title insurance
- Appraisal fee
- Property inspections
- Homeowners association (HOA) transfer fee
- Real estate taxes, prorated to the settlement date
Typical seller closing costs
- Real estate agent commissions
- Loan payoff amount
- Transfer taxes and recording fees
- Owner’s title insurance policy premium and fees
- Copies of HOA governing documents, including CC&Rs and bylaws
- HOA dues, prorated to the settlement date
- Real estate taxes, prorated to the settlement date
Some costs, such as the settlement fee (also referred to as the closing fee), aren’t clearly defined as a buyer or seller fee. Instead, your state and local real estate customs dictate whether the buyer or seller is usually on the hook for these closing costs.
For example, according to Fidelity National Title Insurance Company, Arkansas sellers customarily pay for the owner’s title insurance policy premium, while the buyer usually pays for the recording fees. The buyer and seller split settlement fees equally.
In California, on the other hand, the party responsible for both the settlement fees and the owner’s title insurance varies depending on the county. In San Francisco County, the buyer pays for both the escrow fee and the owner’s title insurance policy. But in Los Angeles County, the buyer and seller split the escrow fee while the seller pays for the owner’s title insurance.
If you’re unsure about which closing fees sellers in your area typically pay, your best bet is to ask either your local real estate agent or settlement agent.
Limbird points out that the local real estate market can shift the dynamic to either the buyer’s or seller’s benefit when it comes to paying fees. “The seller usually pays their closing costs. The borrower usually pays theirs. However, it kind of depends on the market that you’re in,” she says.
