What Closing Costs are Negotiable?
My wife and I are currently bidding on a condo. We are asking for the developer to pay for the max 3% allowed of closing costs (we’re over the limit for 6%). Even with the 3% of closing costs covered, we still might have to pay out of pocket $10k to $15k. I know a…
My wife and I are currently bidding on a condo. We are asking for the developer to pay for the max 3% allowed of closing costs (we’re over the limit for 6%). Even with the 3% of closing costs covered, we still might have to pay out of pocket $10k to $15k. I know a good portion of these costs are standard and non-negotiable, but which ones can I press on and negotiate down, with either the mortgage broker/lender and seller? For bonus points, any examples of typical price versus possible price (ie..standard charge for something is $3k, possible often to negotiate down to $1.5k) Oh great collective wisdom of Brownstoner, provide me with good advice!
If you are buying a new construction condo, you may have more room than you think. People who need to pay back the bank are motivated to make deals. Ask for sponsor to split or pay for mortgage recording, their attorney fees etc.
If you have already negotiated this in, you may be be able to get a “credit” back at closing from sponsor to pay for some of this stuff.
I do the following for my clients that need help with closing costs.
Let’s say the rate is 5%, I can increase that rate to 5.25% which will depending on the day increase my margin by 1%. I will then give the client a 1% broker credit towards their closing costs.
It’s the same thing when a bank offers no closing cost loans for refinances. There are still closing costs but the rate is higher and the additional yield is used to pay those fees.
Adam Dahill
adahill@wcslending.com
Most closing costs aren’t charged by the developer, aside from Seller Legal, and thus can’t be negotiated per se. You can always try to negotiate that the developer pay for them, of course.
Is this new construction? In my recent experience, sellers will pay real property transfer taxes (paid by the seller in resales, but often put onto the buyer for sponsor sales). Depending on the purchase price, this is 1.4% – 1.825% of the price. A year ago they’d pay this and their attorney; in the last two deals I did on new construction, they would no longer cover their attorney’s fee (under $2000 in both cases), so it sounds like you’ve already gotten them down as far as you can. Good luck!
Stamp taxes is one area where there are frequent clashes.
It was our experience that a lot of the costs are pretty standard and can’t be changed. You may be able to find cheaper title insurance than what the bank recommends, and your lawyer fees could be less depending on who you use, but other than that, you probably won’t find much savings beyond the 3% concession that you’ve already negotiated with the seller. Two of the biggest items (the mortgage recording tax and nyc/nys transfer taxes) are statutory.