Rolling Closing Costs Into Loan - HOW DOES IT WORK?

[Boldilocks]

Hi there - been here over 4 years now and finally *finally* have found a house we like and have put an offer on it.

Not so fast, though - nothing can ever be simple...  it's a For Sale By Owner house, so no realtors involved. 

We have a USDA Guaranteed loan, preapproved for $160,000.  The house was listed for $129,900, and seller acceptred verbal offer of $125,000 (which is, he said, what he was *really* hoping to get) - so we went to our lawyer and wrote it up.  We want to roll closing costs into loan, so we let the seller know this, and our lender knows we're doing it too. 

So, we picked up the offer contract yesterday, and took it straight over to the seller to get his lawyer to look over it and him to sign it.  Pointed out to him that the contract stated $132,500 as purchase price, but that $7,500 of that is stipulated for closing costs.

The seller phoned about an hour later saying he was a bit confused/worried because the contract stated a seller concession of $7,500.  Explained to him that he will still net $125,000, but that the rest is for our closing.  I'm assuming the full amount ($132,500) was put in there because it needs to appraise for that?  He wanted to know why it didn't say $125,000 anywhere.  He wasn't being mean or nasty, but the penny didn't seem to drop and he kept saying he didn't want t be responsible for having to pay out the $7,500.

So we told him that we didn't want him signing anything he didn't feel comfortable with - to talk it over with his lawyer today.  As far as we were aware this is a *standard* fill-in-the-blanks type contract, and our lawyer said it was pretty commom for the closing costs to be added in this way. 

I got to thinking after the call though - IS he going to be responsible for handing that money back to us so we can pay closing?  Or does it stay in escrow?  Do we get it directly?  Does it get paid to where it needs to go directly?

Will his lawyer be able to talk him down and make him see that we're not trying to do anything shady? 

Is this a common enough thing???

I'm just really worried that the seller is going to balk at the last minute - this has been the only house in 4 years that my husband has actually liked.  And we must have looked at over 100. 

Aside from this, things have been very cordial with the sellers.  Again, he wasn't being nasty.  They are building a home and plan to be out of the house in 3 weeks.  He even told us that as long as everything is progressing properly, we could move in September 1st even if we haven't made it to closing yet (closing date written on offer is Sept 15th), so that we don't have to pay rent for September where we are now.

[tooleman694]

When you close, the seller will get 125k and the title company will get 7500. This is very common.

For example when you sell your house with a realtor, you sell for 100k but at closing you will only get 94k because the 6k is paid to realtor.

The title company will take care of it.

[Boldilocks]

Thanks for that - you're right, of course.

The seller got back to us and said his lawyer said it was fine and completely standard.

That's one hurdle jumped, anyway!