Eliminating Closing Costs With Seller Subsidy

A final method for lowering closing costs is to negotiate for the seller to pay them. Unfortunately, many home buyers, sellers and first-time real estate agents are also sometimes unaware of this option.

Moreover, seller-paid closing costs are often tax-deductible for the buyer (that's correct), while reducing the capital gains calculation for the seller. This is often called a "seller subsidy" or "seller closing contribution." Either way, it's additional funds working in the buyer's favor.

The basic guideline for seller subsidies are as follows:

  • If the down payment is less than 10%, the seller can subsidize borrower closing costs up to 3% of the purchase price.
  • If the borrower's down payment is 10% or more, the seller can contribute up to 6% of the sales price to pay the borrower's closing costs.

For example, Lisa has found a home, priced at $100,000, that she wants to buy. Atlas Mortgage is willing to provide her with a no down payment loan, provided that she can cover the closing costs of $3,000 and $1,200 in reserve requirements. Lisa has excellent credit and income; however she only has about $1,300 in the bank.

Never one to give up quickly, Lisa negotiates with the seller that she will accept their asking price of $100,000, if they will agree to a seller subsidy toward closing costs of 3%, or $3,000 in this case. Both parties close happily: the sellers basically receives the net price they realistically expected (if not more) and Lisa buys a home with practically nothing.

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Responses

  • Francesca
    What is seller subsidy?
    8 years ago
  • Patricia
    What is a seller subsidy in real estate?
    8 years ago
  • Maxima
    What is a seller subsidy 2011?
    8 years ago
  • Gruffo
    Are seller subsidies to buy deductible for capital gains?
    8 years ago
  • hilda
    Is seller subsidy tax deductible?
    8 years ago
  • gundahar
    What is the claus of a subsidy seller?
    2 years ago
  • Cordelia Davide
    Is decorating subsidy a seller subsidy?
    1 year ago
  • jeffrey
    What would limit ability to use seller subsidy?
    1 year ago
  • Saimi
    Can anyone get subsidy from the seller anytime?
    1 year ago
  • ida trevisan
    What is 3% sellers subsidy?
    9 months ago
  • brogan
    Do you deduct the seller subsidy from the sale prcie?
    8 months ago
  • nicole
    What is closing cost subsidy?
    6 months ago
  • alfredino
    Can seller subsidy be added on to buyers down payment?
    4 months ago
  • Kristin
    Do sellers to benefit more than consumers from a subsidy to buyers?
    4 months ago
  • hiwet
    What can seller subsidy in virginia?
    3 months ago
  • Eugenia
    Is seller subsidy good?
    2 months ago
  • dale
    Is buyer emd deducted from subsidy?
    2 months ago

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