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Let's Discuss Closing Costs



DO YOU KNOW HOW MUCH OF A CLOSING COST CREDIT IS ALLOWED?

Do you feel like the answer is always changing, or you’re always getting a different answer depending on who you ask?

LISTEN TO THIS STORY:

I was recently representing a buyer who was purchasing a property in Wheaton. The purchase price was around $650k. There were significant issues discovered during the inspection, so the parties agreed to a $14k closing cost credit – less than 2% of the purchase price.  Of course, we provided the lender with the addendum right away, which was 3 weeks prior to closing. 

A few days before closing, we received the Closing Disclosure (CD) from the lender, which accurately reflected the $14k closing credit, and left Buyer with a bottom line of about $90k.  We instructed our Buyer to wire this amount to the title company the day before closing.

We show up to the closing at Chicago Title and the closer hands Buyers a CD reflecting a bottom line of $97k – roughly 7k higher than the CD we received just days before. What the hell is going on??? I know for certain we didn’t give our clients the wrong figure to wire. Something must’ve changed…

This final CD showed a closing credit of only $7k. The lender cut Buyer’s closing credit in half. This must be a mistake, I thought. But then the closer from the bank notified the closer at CT that the credit was cut in half because “the credit cannot be higher than the total amount of closing costs.” Wait, I thought you were allowed up to 3%? In any event, the lender already approved the full $14k weeks ago! 

So I called the lender, who shall remain nameless for purposes of this Blog (US Bank!), and, coincidentally, the loan officer was out of the office, with his cell phone turned off. What a professional. After about an hour,  I finally got a hold of someone at the bank who confirmed that the closing credit was indeed unilaterally reduced to match the exact amount of closing costs, as, apparently,  it cannot be more. 

So you’re telling me that my buyer is supposed to just forego $7,000 at the last minute because YOU failed to account for this lender regulation until the day of closing ?! Did you think we wouldn’t notice it? Were you planning to explain this to the Buyers who, after all, are your customers too?! 

Maybe the seller will just delay closing for a week while we get this sorted out? Ha, yea right. No chance.

Buyer is stuck. 

Ultimately, I figured out a workaround (of course), which I won’t get into, that allowed my Buyer to get the full credit and close the deal as planned – although it was a 6-hour closing.  

For now, save yourself the hassle and leave it to our team of real estate attorneys at Miles & Gurney to help navigate the course ahead for you. In unique circumstances like a special year of reassessments, this is where our experience shines. Don’t wait for negotiations to hit a snag and take your client by surprise –talk to us today at 

312.929.0974.

Adam Gurney focuses primarily on real estate law, where he has experience representing buyers and sellers, lessors and lessees, in all phases of real estate transactions. 

                                                                          

 


  • Illinois State Bar Association
  • Chicago Realtors
  • The Chicago Bar Association