Chris Griffith: Negotiating the “X factor” in real estate

CHRIS GRIFFITH

The last ditch grasp … “as long as they pay closing costs.” It never fails, sooner or later there is a negotiation for real estate volleying back and forth and one party will agree with the condition of “as long as they pay closing costs.”

The average consumer usually doesn’t fully understand what the closing costs actually are and how it is or is not going to affect their bottom line. They just know that closing costs are going to cost them money and they don’t want to pay any more money than they have to.

Why a consumer would be going into a purchase or a sale without knowing what their bottom line and closing expenses will be is a mystery. The real estate agents involved have hopefully closed a transaction or two and should be familiar enough to create some sort of an expense or a seller’s net sheet. If that doesn’t happen or the agent can’t or didn’t do it, the selected title agent can even mock up a draft settlement statement which would probably be within a fist full of dollars of the actual bottom line after the final prorations are calculated.

Not knowing those costs is the X factor that I’ve seen more than a few buyers and sellers try to negotiate away over this last fantabulous real estate selling season. From the perspective of being on both sides of the “X” equation at one time or another, I can share that everyone thinks of closing costs differently.

There have been buyers who have finally agreed to a final price negotiation with the stipulation that the seller pays closing costs. Now, the contract indicates that the seller was paying for the owner’s title policy and the documentary stamps on deed, what’s left after those two larger fees are a few minor recording fees, title settlement fee and prorated taxes and homeowner association dues, if applicable. All of which are relatively minor expenses. It’s almost as though they didn’t know what costs or the value of those costs that they were attempting to negotiate away. If someone had asked the buyers to place a dollar figure on the actual cash amount that that negotiation tactic would have benefited them, they probably would have not been able to answer.

There have been circumstances when sellers have also tried to negotiate the same position and demand that the buyers pay all closing costs. It’s like this game of tag … you’re it, you pay the fees. What if the fee isn’t that large? Does the seller realize they are playing chicken with a buyer over a few hundred bucks in closing costs when the monthly holding costs for the property shadow that figure. What’s the point if it fractures the negotiation? If they stick to their guns they could potentially cost the deal and waste hundreds, if not thousands of dollars in carrying costs while essentially fighting over pennies in the grand scheme of things.

Being aware of what the customary closing expenses are going to be before you start negotiating is important. Besides knowing your own bottom line you really need to know if there is any leverage or disadvantage in who is or isn’t paying for specific closing costs should the other party throw the X factor into the mix.

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Chris Griffith is a real estate agent at Downing-Frye Realty Inc. in Bonita Springs. If you have a question about local real estate or Bonita Springs, e-mail her at chris@LifeInBonitaSprings.com.

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