Why Realtors Educate Home Buyers About Closing Costs
Do Your Real Estate Clients Know All About Closing Costs?
Certain home buyers, especially first-time buyers, often think that the agreed upon price of the home encompasses all of their costs. If they aren’t aware that certain transaction costs, like closing costs, are separate from the sale price of the home they could be in for sticker shock once it’s time to close.
As their trusted real estate agent it’s up to you to educate buyers about all of the “hidden” costs associated with purchasing a home. Closing costs are among those hidden fees, and here’s why it’s so important to explain closing costs and how they should influence the final purchasing decision.
Home buyers Might Think That the Seller Covers Closing Costs
Because some sellers will cover closing costs, especially in a lackluster seller’s market, many new home buyers might not be aware that this isn’t always the case.
Do your clients understand that closing costs can total anywhere from 2% to 4% of the home’s total value? On a $350,000 home this cost can range from $7,000 to $14,000, which is no small sum for cash-strapped buyers who are making one of the largest investments of their lives.
Of course, it’s great news for buyers if the sellers agree to cover closing costs during negotiations. But managing those expectations and being transparent about the possibilities can only have positive outcomes. Plus, when you manage expectations, you’re more likely to close the deal.
Some Home Buyers Think That Closing Costs Can Be Rolled Into Their Mortgage
Your clients might also assume that they can easily have their closing costs included in their monthly mortgage payments.
Take the time to explain that it’s not always simple or straightforward to have the mortgage lender roll those costs into the home’s monthly payments. Do your buyers know that their lender must first be willing to finance more than the home’s total loan value if closing costs are to be included? To avoid any surprises at closing, it’s important for buyers to understand the total value of the home versus the transaction costs associated with the home.
Another option is to explain that the lender might pay all or part of the closing costs if the buyer doesn’t have enough cash, or if those costs can’t be included in the mortgage. However, be sure to mention that a higher interest rate on the loan is also part of that deal.
Learn more about how a Home Warranty can save homeowners from unpleasant financial surprises and add value to your business.