2 Reasons Sellers Pay Settlement Costs

Settlement costs, often referred to as closing costs, can significantly add to the up-front cost of a home's purchase. Typically, these expenses run from 1 to 3 percent of the home's total value. They cover items such as loan origination, document transfer and changes made with the county registrar. These costs are incurred on the buyer's and seller's side to pay the multiple professionals involved in the transaction. A buyer can ask the seller to pay these expenses.

#1 Settlement Costs Negotiated in Sale Price

One of the primary reasons sellers pay settlement costs is to finalize the sale of the home. When a seller will not come down on price, the seller can help the buyer along by simply offering this step. This reduces the initial expense of buying the home, opening up the opportunity for a wider range of borrowers without reducing the sale price.

#2 Seller Responsible for Some Costs

In some cases, the seller offers to cover some of the settlement costs because the seller is in part responsible for the additional expense. For example, if there is any complication with the property title due to outstanding tax liens, the settlement cost can go up. Since this is the seller's fault, the seller should offer to take care of the issue.