Seller Contributions Towards Closing Costs: How Much Is Too Much?

Q: My buyer needs help paying the closing costs associated with their loan. When writing up their offer, they’ve asked that in Section 4 – Seller Contributions, item (b) Closing Costs, I check the second box and put 100% in the blank. They’d like the seller to pay all of their closing costs. Can I do that?

A: The first thing to recognize is that the blank for a percentage in that section is tied to a percentage of the purchase price, not a percentage of the closing costs. So, the simple answer is no, the buyer should not ask the seller to contribute 100% of the purchase price toward their closing costs. Just as important though is considering the lender’s limitations. Depending on the loan type, only a specific percentage of the loan amount can be contributed by the seller and applied toward the buyer’s closing costs. There is not a percentage of closing costs field included Section 4(b) because that’s not how lenders calculate it, and most sellers would not be comfortable committing to pay a percentage of an unknown number. Best practice is to contact the buyer’s lender and ask for the maximum dollar amount the buyer can accept from the seller as a credit toward their closing costs and include that number in the first blank.

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