In slow real estate markets, sellers can get a little creative when trying to sell their homes. Curb appeal, white carpet, new bathrooms ... you name it. Anything to get the property moving. Sometimes sellers will throw in some financial considerations by either reducing the sales price or crediting the buyer some money for closing costs. Or both.
If you're in a selling situation and have thought about paying for buyer's closing costs then there is a key question you must answer: "How much are you willing to contribute to the buyers settlement fees?" But before you answer, you need to know that the buyer's lender places restrictions on the type and amount of seller contributions. The first lender rule places seller contribution limits on how much the buyer has for a down payment. If the buyer has a down payment equal to 0-5% down, a lender will typically limit a seller contribution to no more than 3% of the sales price. Anything extra won't be allowed. And no, you can't give the buyer cash at closing, that's illegal. You can only pay for the buyers closing costs.