We are in a strange (to me) situation. In selling a house, an offer has been made in which we are asked to increase the asking price of the house by 6% which is the closing cost to the buyer. Upon selling, we would then pay the closing cost and keep the original price of the house. Not too sure how much I like that. Opinions??

Options, you can turn it down but I don't see much of a down side for you to do this. It sounds like the buyer is trying to hide or deceive someone, maybe the lender. Have you asked why?

Asking the seller to pay all or at least part of the closing cost is very common ( esp now ) normally they will not ask you to increase cost of house, but just pay it from your profit on the home.

I would assume they know or expect you don' have a lot of profit in the home and have to raise it?

The issue here is, what is the appraised value of the home, they can only get a loan up to that value, not the sell price.

But there is nothing wrong with this, and it is all part of the deal. What this is telling you, the buyer has no money, they can't afford to buy this house because they don't even have enough money to pay closing cost ( or have enough for down payment and closing cost)

So you approach this very carefully since your buyer may not be well qualified to buy the property.

I agree with Balenger & Fr_Chuck.

But isn't 6% quite a lot for closing costs?

Thanks for your replies. I would have thought this is illegal, but based on your comments and research I've done, it is not. It is certainly a crazy practice for lenders. With all of the problems this country has with foreclosures, you would think this would be highly discouraged.

While I use it mostly for myself, to buy rental property, I am a licensed real estate agent, and basically the banks that loan, don't care, as long as the property is worth more than the loan. In fact the more money they borrow, the more money the bank makes.

Real estate person, they will make their commission on that 6 percent more, so they make more money.

Seller, since often the buyer will want the seller to pay this out of his profit, he is glad since he will have more money in his pocket.

Buyer, often they can't afford the closing costs and this allows them the ability to do so.

But agree, I guess it depends on how much you are selling the house for. Six percent is a lot for closing costs unless the selling price of the home is 40,000 or something