Negotiating Low Closing Costs

More than a few new buyers who are looking at a real estate transactions are considering how to pay low closing costs to keep their total payment more affordable. It’s important for buyers to realize that the sale price agreed on by the seller will not be their final total cost number, since there are other costs attached to buying a property. Understanding closing costs will help real estate buyers who are borrowing from a financing lender to make deals that work in their best interests.

Types of Closing Costs

When it comes time to look at implementing a real estate sale, buyers have to know that they will be evaluating different categories of costs related to doing the paperwork for a title transfer and arranging for lending the mortgage. Some of these costs are related to items like the appraisal to make sure the home or property is correctly valued. Others have to do with title costs, like title insurance, others are based on origination or underwriting of a mortgage loan. Other third party costs can also apply.

What Closing Costs Look Like

When they are properly itemized in a “good faith estimate” from the lender, closing costs may show up as a variety of coded charges. Buyers should ask about all applicable charges and understand what they represent as they approach settlement.

What Buyers Can Change

There are a number of closing costs that buyers can affect by choosing their own professionals to do some of the work associated with the purchase. In many cases, buyers can choose their own attorneys who will take in some of the closing costs associated with title. The buyer may also be able to choose a title insurance company, though many lenders have preferred partners.

Working with Closing Costs

In the majority of cases, buyers simply work the closing costs into their overall assessment of what they can afford to pay for property. In a down market, where it’s harder to sell homes or other properties, more than a few sellers are offering to pay part or all of the closing costs for a property, which makes the negotiating process on closing costs much easier. For buyers who don’t have this element built into their real estate purchase contract, many will have to ask their lenders about every individual charge or fee and negotiate closing costs down to an affordable level. Buyers should never just go by a “monthly payment” in an amortized mortgage, but they should look at the total principal including closing costs and ask questions up front about what they are really paying for.

Negotiating closing costs is an important aspect of real estate buyers looking out for their own best interest. In some cases, a real estate agent is a helpful resource for the buyer, but in other cases, this aging can get in the way if he or she seems to be acting in collusion with preferred lenders who have their own preferences and contractual demands for a final mortgage agreement. Many buyers find it important not to be “held hostage” to a lender’s whim, and get educated about negotiating these details rather than just letting the buyer’s agent control the decision making process.