If you’re using financing to purchase a Snohomish County home then more than likely you’ll be using NWMLS’s form 22A Financing Addendum. As part of a Purchase & Sale Agreement, 22A details 8 highly pertinent financing items for both the buyer and seller.

  1. Loan Application
  2. Seller’s Right to Terminate
  3. Loan Cost Provisions
  4. Earnest Money
  5. Inspection
  6. Appraisal Less Than Sale Price
  7. FHA/VA/RD – Appraisal Certificate
  8. Extension of Closing to Accommodate Requirements of Regulation Z of the Truth in Lending Act

Even though there are 8 equally important items, this post will be focusing on Item 3: Loan Cost Provisions.

What are Loan and Settlement Costs?

Typically referred to as buyer’s closing costs, loan and settlement costs are but not limited too: prepaids, loan discounts, loan fee, interest buy down, financing. closing or other costs allowed by the lender – not real estate broker commissions. These are normal and customary costs in purchasing; however, costs can change from lending company to lending company.

How Does Item 3: Loan Cost Provisions Work?

On Form 22A Item 3, the first sentence reads “Seller shall pay up to $ or % of the Purchase Price ____________ ($0.00 if not filled in), which shall be applied to Buyer’s Loan(s) and settlement costs”.

In Washington State, it’s customary but not required, for the seller to contribute towards these costs.

If the seller agrees, then the seller, out of their proceeds, contribute the dollar or percentage amount towards the buyer’s purchase.

What if all the Seller’s Contribution Cannot be Used?

Can the buyer pocket the difference at time of closing? No.

Why? The seller already agreed to the amount

Even though the seller contributed those funds towards the buyer’s closing costs the buyer didn't/can't use all the funds; therefore, the seller doesn't have to give the buyer those monies because its not part of the loan and settlement costs. The remaining balance is returned to the seller.

Seller's contribution to buyers closing costs works different in every situation, from bank owned and short sales to new construction and resales, and it is important to know how:

  1. How the seller plans/or handles buyer's closing costs
  2. How much it will take to close the buyer's transaction

Stay informed and start searching for a home today.