How can the seller limit the amount of dollars that the seller agrees to pay for the buyer’s transaction costs?
The hotline has been getting this question, the seller can counter offer $0 or a lower number of dollars in the blank (e.g., At Closing, Seller will pay Buyer’s transaction costs not to exceed $ ___________ ).
Hotline recommends educating the seller to put a number of dollars in this blank that the seller is comfortable with paying at closing (e.g., $0, smaller number of dollars) and expect that the buyer will spend all that money (e.g., buyers are rational, human nature, logical).
SCR310 requires the seller to record the deed, so all fees associated with recording a deed almost have to be a seller’s transaction cost (e.g., deed preparation, deed recording costs, deed stamps/tax/recording costs calculated based on the value of the Property). One thought to help educate the seller is the buyer is in effect "reimbursing" the seller for these costs when buying the property for the purchase price at closing. [Oversimplified math for illustration:
Purchase price – all the seller's payments to properly close = the seller's proceeds.]
The seller is usually contractually obligated to pay their listing brokerage and their closing attorney (e.g., contractually required real estate broker compensation, and fees and expenses of Seller’s attorney).
Generally, the listing agent and seller can ballpark the typical transaction costs for a typical buyer in a typical SCR310 deal. That can help the seller to negotiate the amount in this blank: At Closing, Seller will pay Buyer’s transaction costs not to exceed $ ___________ , which includes non allowable costs first and then allowable costs (FHA/VA).
The seller has ultimate control over this dollar amount in contract negotiations since the seller can counter offer and reject.
6. TRANSACTION COSTS: Buyer’s transaction costs include all costs and closing costs resulting from selected financing, pre-paid recurring items, insurance (including but not limited to mortgage insurance, title insurance lender/owner, flood, insurance, and hazard insurance) discount points, interest, non-recurring closing costs, title exam, FHA/VA allowable costs, fees and expenses of Buyer’s attorney, contractually required real estate broker compensation, and the cost of any inspector, appraiser, or surveyor. Seller’s transaction costs include deed preparation, deed recording costs, deed stamps/tax/recording costs calculated based on the value of the Property, all costs necessary to deliver marketable title and payoffs, satisfactions of mortgages/liens and recording, property taxes prorated at Closing, contractually required real estate broker compensation, and fees and expenses of Seller’s attorney.
All costs to obtain information from or pertaining to owners’ association, private/public transfer fees, and any costs similar to transfer fees (e.g. certificate of assessment, capital contributions, working capital, estoppel fees or otherwise named but similar fees) are the [. ] Seller’s or [. ] Buyer’s transaction costs. If no box is checked these costs will be added to Seller’s transaction costs.
At Closing, Seller will pay Buyer’s transaction costs not to exceed $ ___________ , which includes nonallowable costs first and then allowable costs (FHA/VA). Buyer is responsible for any Buyer’s transaction costs exceeding this amount. If the amount exceeds the actual amount of those costs or amount allowed by Lender, then any excess funds will revert to Seller. Seller will also provide or pay for all of Seller’s transaction costs. If no Closing, Buyer is responsible for Buyer’s transaction costs and Seller responsible for Seller’s transaction costs.
Unless otherwise agreed upon in writing, Buyer will pay Buyer’s transaction costs and Seller pay Seller’s transaction costs.
Posted by: Byron King on 03/07/23 (This information is only accurate as of 03/07/23. You must contact SCR for updates and changes to this information after 03/07/23 as laws and regulations may change over time. SCR 803-772-5206 or email info at screaltors.org or email byron at screaltors.org)
This information is not legal advice. This information is intended only to provide general information and may not be relied upon as specific legal guidance. Legal counsel should always be consulted before acting in reliance on this information.
