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.
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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