Not Paying For Our Buyer’s Low Interest Rate

We think we’re finally past most of the speed bumps on the road to selling one house and buying another.  The appraisal was the last hurdle for selling our house, and unfortunately it came in $5000 lower than our asking price.  We knew this was going to be an issue even before we listed our house.  We discussed it at length with our realtor, and she even took us around the neighborhood to check out other houses that we for sale before we set our price.  We knew that the highest price any house in our neighborhood had sold for recently was $205k.  And the lowest was $135k.  So we knew that finding comps in our neighborhood was going to be tough when it came time for an appraisal.  There were a couple houses for sale for more than we listed ours, but they haven’t sold yet, so they don’t count.

The appraiser tried his best.  He was aware of the offer price, and how few days the house was on the market.  He even went to a fancier neighborhood and looked at comps there, to give us the benefit of the doubt as far as locations (we are in one of the best possible locations within our neighborhood).  He gave us a value of $210k, which is higher than anything else has sold for here this year.  But that meant that our net from the sale was going to be reduced by five grand.  We really had no option but to reduce our price.  More than 80% of the loans in this area right now are FHA, and this FHA appraisal would stick with our house for the next six months.  Considering the comps, there is really no reason to think that a conventional loan appraisal would put it any higher.  So our only chance of selling the house for more than $210k was to find a cash buyer.  And that doesn’t sound like fun at all.  So we agreed to lower our price.  But we wanted to check out the closing costs situation with our buyer, to see if we had any negotiating room there.

Our realtor requested to see the schedule of fees for the buyer’s closing costs, and the buyer’s agent agreed to let us look at them.  I noticed that our buyer had a good rate (4.85% on a 30 year loan), and was impressed with that.  But her closing costs were huge… nearly $8000.  We had originally agreed to pay up to $7500 in closing costs for her, with her paying full price for the house.  But with the lowered house price, we were hoping to pay less in closing costs.  It was our realtor who figured out that the reason our buyer’s interest rate is so good is because she bought the rate!  I don’t know a whole lot about creative financing, but apparently you can pay an additional fee at closing and secure a lower interest rate – lower than you would otherwise qualify for.  And in this case, with the sellers (that would be us) paying her closing costs, that’s exactly what this buyer did.

Our realtor discussed this with us, and suggested that we play hardball.  She contacted the buyer’s realtor and said that we were willing to pay all necessary closing costs, but that a fee (four thousand dollars in this case!) to lower the buyer’s interest rate did not count as a necessary cost, and that we would not be paying it.  The next day she called back to say that the buyer had agreed to pay her own rate buy-down charge.  Whew!

My husband and I had discussed this before we talked with our realtor, and had decided that even if we couldn’t get the buyer to budge on closing costs, we wanted to go ahead with the deal.  We have money in savings that would could have used to make up the difference when it was time to close on our new house, and we didn’t want to start over with finding a new buyer.  But that said, we’re really glad that our realtor did such a good job with this transaction.

Once it’s all said and done, the lower appraisal value is only going to impact our net proceeds by a couple hundred dollars, since we’re now only paying about $3500 in closing costs, and not paying commissions and fees on the $5000 that got knocked off the price of the house.

So now we’ve started packing.   And I remember why I really don’t like moving.