How a Good Agent Can Close a Tricky Transaction
December 4, 2017 | Ernie Dill

We have a transaction we’re just going under contract on right now in Lee’s Parke Estates that I want to elaborate on to let you know what a good agent can do for you.

The seller is a FSBO seller who’s recently upgraded the property, and they did a great job doing so. They decided that their commute to the Beltway was too long, so they bought a more expensive home located a little further north in Stafford.

However, now this seller has two homes and doesn’t have enough equity in the first home to hire a real estate agent, hence why they’re selling as For Sale By Owner. The seller is both showing the home to potential buyers and deciding whether to rent it out—which would be a disaster because that would deteriorate the home.

I have a well-qualified buyer who wants to buy this home. If you were a buyer in our local market and you looked at some of the past transactions that have closed, you’d find that in 80% or more of those transactions, the seller paid the buyer’s closing costs up to 3%. Sellers might be incredulous at this, but that’s the reality.

If you’re a buyer capable of putting 20% down, is it fair to ask the seller to pay the closing costs? Well, if you can get those costs paid elsewhere, why not? If you’re a seller with a perfect home who’s not desperate to sell and you have multiple offers, you have a lot of negotiability, and you can refuse to pay those closing costs if the buyer asked. I know I would.

However, this FSBO seller doesn’t have any equity. They paid $450,000 for the house and put around $20,000 into it for their upgrades. It’s on the market for $469,000 because they’re willing to pay their prospective buyer’s agent 2.5%.

My buyer wanted to offer $450,000 for this house and pay their own closing costs. If they did that, they would pay roughly $461,000, with the closing costs amounting to $11,000. As an alternative, I suggested asking for a 3% concession from the seller, which would mean they’d get back $14,000 and pay only $455,000.

As we entered into the transaction, the seller wasn’t willing to pay the 3% concession. They then asked (intelligently) what the real closing costs were. As it turned out, the real closing costs amounted to $9,551 because the buyer would be able to pay 20% down and they’re not paying private mortgage insurance. The buyer’s costs would’ve been closer to 2.5% if they were putting only 5% down.

For transactions in the $450,000 to $470,000 range, the standard closings costs are around 2.5%. In this case, your lender would let you get a concession to pay the actual closing costs—not the full 3%. If the home was less expensive—say, $250,000 or $300,000—the concession might be 3% or more.

But, like I said, the seller wasn’t willing to pay the 3% because that meant they would have to bring $1,000 to the table. So, how do you work out a deal like that?

I went to a lender and got them to pay part of the closing costs by giving the buyer a credit, which in this case was $5,685. Under this agreement, the seller agreed to pay $4,775 of the closing costs. By doing this, I was able to bottom-line about $8,000 for the seller and make it comfortable enough for them to proceed with the transaction.

In the video above, I’ve provided a purchase sale scenario from a lender that details all the fees that go into the closing costs. As a buyer, this is a useful sheet to look over to get a better understanding of this part of the transaction. The seller’s estimate of proceeds is simply an excel spreadsheet that we convert into a PDF, so as a seller you can look through both sides of that slide as well to get a better understanding.

Not every agent can do this type of transaction or negotiate with both sides of it because it’s a very delicate situation, but we got it done. I hope this gives you an idea of what a good agent can do for you, whether you’re a buyer or a FSBO seller.

This transaction is indicative of what a good agent can do to help you, whether you’re a buyer or a FSBO owner.

If you have any questions about this transaction or you’re thinking about buying or selling in our market, don’t hesitate to reach out to me. I’d be happy to help you.


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