I’m often asked if banks will pay closing costs in the purchase of REO property (Real Estate Owned)...in other words a bank owned property. The answer is yes. Most banks will pay closing costs. These costs are added to the purchase price, so if you offer 250,000 for a property and ask for $5000 in closing costs the bank sees the purchase price as $245,000. If this isn’t their bottom line they’ll counter for a higher price which reflects the closing costs. If they won’t take less than $250,000 the purchase price better be $255,000.
I think the more important question here is what do banks consider their closing costs to be. In a normal real estate transaction in California the seller pays specific fees and the buyer pays specific fees. Everyone understands this except banks. Banks feel they should pay the absolute minimum in order to recoup their loses. Banks usually don’t pay tax stamps and some won’t pay for the termite inspection or the necessary repairs. For this reason as well as others home warranty insurance is always adviseable and some banks may pay this cost. Many banks consider their own escrow fees and title as their responsibility the rest will come out of the buyer’s pocket. Most REO properties are sold “as is” this means whatever is wrong with the house is the buyer’s responsibility. The purchase price can be renegotiated to include any outstanding repair bills required inorder to sell the home but these costs will have to be added to the purchase price which sounds simple but in actuality with a declining market once you start adding costs to the price of a home the buyer runs the risk of out pricing the home for the market or offering more for a home than it’s worth. If the home won't appraise you won't get the loan.
So now that I’ve totally confused you here is the bottom line. The seller considerers his closing costs responsibilities to include sellers escrow fees and seller title fees(this can vary). The buyer will be responsible for the rest. You can request the seller pay these fees but the total for these fees will have to be added to the purchase price of the home. If you are asking for 3% IN CLOSING COSTS, that 3% will be added to the purchase price, making the home 3% higher in cost. The buyer does not have to come up with this money at the end of escrow he is actually financing it. Make sure the price of the home will not exceed what the home is actually worth or this won’t work.
I think the more important question here is what do banks consider their closing costs to be. In a normal real estate transaction in California the seller pays specific fees and the buyer pays specific fees. Everyone understands this except banks. Banks feel they should pay the absolute minimum in order to recoup their loses. Banks usually don’t pay tax stamps and some won’t pay for the termite inspection or the necessary repairs. For this reason as well as others home warranty insurance is always adviseable and some banks may pay this cost. Many banks consider their own escrow fees and title as their responsibility the rest will come out of the buyer’s pocket. Most REO properties are sold “as is” this means whatever is wrong with the house is the buyer’s responsibility. The purchase price can be renegotiated to include any outstanding repair bills required inorder to sell the home but these costs will have to be added to the purchase price which sounds simple but in actuality with a declining market once you start adding costs to the price of a home the buyer runs the risk of out pricing the home for the market or offering more for a home than it’s worth. If the home won't appraise you won't get the loan.
So now that I’ve totally confused you here is the bottom line. The seller considerers his closing costs responsibilities to include sellers escrow fees and seller title fees(this can vary). The buyer will be responsible for the rest. You can request the seller pay these fees but the total for these fees will have to be added to the purchase price of the home. If you are asking for 3% IN CLOSING COSTS, that 3% will be added to the purchase price, making the home 3% higher in cost. The buyer does not have to come up with this money at the end of escrow he is actually financing it. Make sure the price of the home will not exceed what the home is actually worth or this won’t work.
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