To create some context and set the tone of where the article title stems from its important to revisit two items: the Residential Purchase & Sale's Financing Addendum and the Great Recession.
Let us begin with the Purchase & Sale contract's Financing Addendum.
Within a buyer’s Financing Addendum (Form 22A) there's a paragraph allowing a buyer tthe option to request the seller to contribute money (a fixed dollar amount or as a percentage of the purchase price) towards buyer’s closing costs.
Yet, what are a closing costs?
Closing costs are costs associated with the buyer's property purchase: loan origination fee, title fee, escrow fee, county document recording fee, prorated HOA dues, and sometimes this can include a home inspection and property appraisal. These are fees that are in addition to a buyer’s downpayment - if their loan requires a downpayment and examples are FHA financing or conventional financing.
Related Video: What is the Residential Purchase & Sale
Yet what does the Great Recession have to do with 2019?
To understand, let us time travel to a period many would like to forget.
During the Great Recession the real estate market heavily favored buyers with housing inventory at records highs (2+ years worth of standing inventory) and interest rates at historic lows along with a surprisingly amount of qualified buyers.
That buyer favored marketplace allowed and perpetuated the use of Form 22A’s paragraph of seller’s contribution towards buyer’s closing costs since buyers qualified for a home loan yet lacked the liquid funds to complete a purchase on their own. This practice became commonplace and a norm for the current times.
However, 2019 has vastly different economics and consumer confidence than the Great Recession and over the last handful of years Snohomish County's real estate market has swung to the opposite spectrum to favor sellers.
So what is happening to the Financing Addendum’s paragraph? Well, that line item is still in place at the top of page 2 on Form 22A though it is not used with much success.
Buyers in 2019 who are requesting sellers to contribute towards closing costs are competing against buyers whom have the financial ability to pay for their own closing costs. As a result, buyers who have the closing cost request contained in their offer are often “beat out” by competing offers.
To answer the question Are Sellers willing to Contribute towards Buyer’s Closing Costs in 2019?
The answer is: No.
And its more-so than No sellers aren’t willing too; its that sellers don’t have to. Buyers are presenting offers stating buyer to pay their own closing costs. Even buyers stacking their closing costs are havingn difficulty because they’re seen as more risky than their counter part and sellers don't want to risk a low appraisal.
What can buyers to improve their chances of their purchase and sale being chosen by the seller?
- Don’t request the seller to contribute towards closing costs.
- Try get a gift, or pull from a 401K, to pay for own closing costs.
- Don’t include any eroneous contingencies within the purchase & sale.
There haven't been any indidication of the Snohomish County housing market swinging back in favor of buyers or even towards a nuetral market (6 months of standing housing inventory). If owning a home is a goal then start now by saving and eliminate unneeded exspences to set yourself up for success and become a stronger buyer.
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