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Another reason to choose The Grumbles Team to help you with Franklin TN Real Estate

Another reason to choose The Grumbles Team to help you with Franklin TN Real Estate


Whether to buy or to sell a home in and around Franklin, TN you need an agent that understands the market, your needs, the area, inspections, building styles, mortgage finances , and also just plain common logical sense.  In the past few months we have dealt with agents representing their clients that do and don't have a handle on the last two items Financing and Logic. So let's talk for a moment about closing costs that the buyer has to have to purchase a house.  These closing costs cover things like title insurance, origination points, prepaids, taxes, appraisal, closing agent fees, etc.  These costs can add up and sometimes can be the difference in making a deal happen or fall apart at the 11th hour of negotiating. It used to be that the buyer and seller just agreed to raise the sales price of the house to cover the closing costs needed by the buyer.  The issues just arise later when the appraisal doesn't support this higher sales price, so the buyer and seller are again back to square one.

Well here is our viewpoint on the subject, in the form of an example.

Lets take an example of a home that the seller has listed for $350,000.  The buyer wants to offer $340,000 and have the seller pay up to $10,000 in buyers closing costs.  These examples will use a base FHA 3.5% down and 3.25% Interest Rate.  Lets assume that the seller is also expecting to get a sales price of $340,000 before they pay their own closing costs.  The payments quoted below will be only principle and interest for simplicity.


Well they could just write it up for $350,000, see if it appraises, but in reality this is the buyer financing his closing costs, because in our market where 97% of list price is the going rate, he should be able to get this house for around $340,000.  So how is the buyer penalized for financing his cosing costs by overpaying: Buyer's payment goes from $1428 to $1470 ($42 per month) at 3.25%.  Over 7 years that is $3528 extra in expenses, plus at the time they want to sell they have a $10,000 higher principle balance, making it harder to sell the home, and especially harder to roll the next Buyers closing costs into a the Sales price. 


The buyer has to save up the $10,000 which makes their total down payment equal to $21,900.  This is not likely to happen and the limits to which the money can be gifted make it hard to do as well.  The seller does get his price, but likely he has to wait a long time to find a buyer with this cash in hand to buy his house.  What typically prevails here is that the seller realizes he wants to sell, has a qualified buyer but to hold the deal together he pays the $10,000 in buyers closing costs.


The buyer talks to the lender and gets them to cover the $10,000 in closing cost by increasing historically low rates by 1/8 or 1/4 of a point.  Lets use the 1/4 (.25%) to show in this example.  The offer is written with the contingency that the bank can provide up to $10,000 in closing cost for the buyer and with a price of $340,000.  The buyer's payment only increases from $1428 to to $1473 ($45 per month more).  Over a typical stay in a home of 7 years that increase in payment equals $3780.  The buyer could refinance to a lower rate to keep this from increasing if they did decide they would stay long-term.  The benefit of this method is that they got the house at the price they wanted so their mortgage balance is not increased by $10,000 allowing them to sell easier, and to refinance or to remove mortgage insurance premium payments.


The buyer has the lender raise the rate by 0.25% just as in Scenario 3, but instead of making the sales price at $340,000, they reduce it to $336,000.  In this scenario the bank still covers the $10,000 in closing cost for the buyer, so the seller is reducing his net by only $4000, which a good negotiator like The Grumbles Team can pull of because under typical terms the seller would settle for the $340,000 and pay the $10,000 in closing cost so his net would be $330,000 and we can show them how this offer nets them $6000 more than the result of Scenario 2.  The buyer's new payment is now only $1456 from $1428 ($28 more).  SO over 7 years this is only $2352 in crease but his principle balance is $4000 lower than any of the other scenarios.  It is a win- win for all parties.  The seller got $6000 more, the buyer had a lower down payment, no closing costs, and a mortgage that is not inflated to cover rolling in closing costs at only a $28 per month penalty.


If you think that you could benefit from a logic minded Real Estate Agent, then you should setup your appointment with The Grumbles Team today.  We have our iPads with us at all times making these kind of calculations and showing you ways to save as a buyer or a seller. 






Franklin | Brentwood | Spring Hill | Mike Grumbles & The Grumbles Team specializing in Franklin TN Community Homes for Sale

The Grumbles Team is our family serving your family with your real estate needs in Franklin, Tennessee 615-587-5843.

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EXIT Realty of the South | 1227 Lakeview Dr. Suite 1 | Franklin | TN | 37067 | 615.550.5555

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