Buyer's agent fee: cash at closing, or can it ride on the loan?

Question

Looking at a small rental as a first purchase and I want the whole cash number before I go further. I've got the down payment and closing costs sketched out but the agent fee is confusing me. If I owe my agent $6,000 under the agreement and the seller only credits $4,000, does that $2,000 come out of my pocket the day of closing or does it roll into the loan somehow?

Also I was told rolling it in wouldn't count against my down payment. That sounded too convenient to be true.

Rena Guide · Accepted Answer

That $2,000 is cash at closing. It shows on the settlement statement as a charge to you and you wire it with everything else. It doesn't get added to the loan amount.

The reason people think it can be financed is that seller concessions look like financing from the buyer's side. If the seller agrees to credit $4,000 toward your costs, you effectively borrowed that money by paying $4,000 more for the house and borrowing against the higher price. That works only up to the concession cap for your loan product, and the caps differ by loan type and down payment size. Lenders also won't let a concession exceed your actual closing costs, so you can't turn spare concession into cash back. Confirm the cap in writing with your lender before you write the offer, because the numbers change and they vary by program.

So the honest cash line for your sketch is down payment, plus closing costs, plus whatever slice of your agent's fee the seller doesn't cover, plus your reserve. On a $200,000 purchase with 20% down that's $40,000, roughly $4,000 to $6,000 in closing costs depending on your state's transfer taxes and title practice, and then the agent gap.

One piece people skip on a first rental: the property needs cash after closing, not just at it. A vacant unit that needs paint and a lock change and a first month with no rent is real money, and it lands in the same 30 day window as everything else. Budget it separately from the acquisition number so it doesn't get absorbed by an inspection surprise.

laurenkim53 · Answer

In the price range I look at, $60k to $90k rural, the concession conversation goes differently. Sellers there are often older owners with no mortgage and they'll credit almost anything if you close fast, but the appraisal has to support the bumped price and that's where it falls apart.

diane_kowalski · Answer

@hollow the appraisal point catches people. You raise the price $4,000 to fund the credit, appraisal comes in at the original number, and now you're covering the gap in cash anyway plus you still owe the agent.

aaron_fitz10 · Answer

So the answer is basically it's cash unless you can talk the seller into it and the appraiser agrees. That's less flexible than I assumed when I started reading about this.

Buyer's agent fee: cash at closing, or can it ride on the loan?

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