Help w/closing vs reducing home price? (insurance, loan, interest rate)

[DubbleT]

I am buying my first home from an owner/agent. After several counter offers we finally came to an agreement on terms, but unfortunately the underwriter didn't like the way the ageement was worded so we have to rehash the contract again.
The problem from my POV is that the seller is unwilling to come down on his price but is willing to pay a set amount towards closing costs. I would rather see the price of the property reduced by the amount he is willing to pay for the closing costs. I think it would be to my advantage to have the lower selling price. A smaller loan would mean less in closing costs too wouln't it? Not to mention smaller monthly payments, less insurance, less interest over the life of the loan, etc.
I have the cash for a nice down payment and I can handle the closing costs on my own, so I am just not understanding why the seller is insisting on keeping the closing costs assistance as a part of the contract. What am I missing? The house is under 125K so it's not like we are talking big upfront money here. Is there some advantage to him in keeping the selling price higher?

[Rick Lee]

For $125k I don't know why anyone argues about this stuff. Where I used to live that was a down payment, not a sales price. However, if the seller is an agent, they may want to keep the price high so it doesn't pull down his neighbors' values, whose houses he might also eventually sell. Unless he hasn't lived in that house for two of the last five years, he can't possibly have any capital gains issues.

[onevthoki]

I agree with Rick. What you could do though, is use the closing cost assistance to buy down your interest rate, thereby giving you the lower monthly payments you want.

[emailvasally]

I agree with both posters. Alsois it possible that someone is paying closing costs for them? Are they moving out of state for SO job? I know with my DH's job they relocated us and paid those expenses. I preferred to pay closing than reducing price of home.

[DubbleT]

Originally Posted by Rick Lee

For $125k I don't know why anyone argues about this stuff. Where I used to live that was a down payment, not a sales price.

I am fortunate enough, or perhaps that's unfortunate enough, to live where COL is low. So are wages, meh... $125K buys me a nice little starter house in an area I like.
I'm a natural born penny pincher and it wouldn't matter to me if my payments were lowered by $100 month or only $10 a month, I just don't see the point of putting more money into the banks pocket if I can keep it in mine. For the same reason I don't plan on writng repairs into the contract, as I don't see any reason to pay 6% interest for 30 years on an additional few thousand dollars when I can just as easily pay for any needed repairs out of pocket.

The guy has never lived in the house. He bought it cheap as an investment to fix up and sell. I know I am financially naive in a lot of ways, but it seems to me this guy makes the same profit whether he pays closing costs or whether he lowers his price a few thousand. I simply found it curious that he seems to be dead set against a price drop and wondered if there might be some underlying factor that would account for it.

I thought maybe it also had something to do with his being an owner/agent, maybe I should have put this in the real estate forum instead of here?

[Rick Lee]

I'm not saying $125k is not real money. But the 1-2% of that price you're probably talking about as seller assit or price reduction is gonna be totally negligible in your mortgage payment, a little less so as cash at closing. That it's an investment property for him might explain things more. That means he has tax consequences by the sale. Maybe he has partners or has to show X% profit margin for someone. Dunno.