If you’ve been in the business for any length of time, you probably know that many buyers are unaware that closing costs are on top of the purchase price. Since most buyers don’t anticipate these costs, it’s important to explain them when you first start working with the buyer.

The first step to take when you first working with a new buyer is to give them an approximate percentage, not an exact number. As a rule of thumb, the buyer’s closing costs will be approximately three percent of the purchase price depending on their lender and their down payment. Explain that those costs go to the title company, to the lender, the closing agent, as well as other fees such as the proration of taxes. (For sellers, closing costs are about two percent plus the commission amount.)

To soften the blow, remind the buyers that their mortgage payment is paid in arrears. In other words, unlike their rent where they must pay ahead of time, the mortgage payment you make on May 1 is actually for the month of April. For most buyers, that means they may go four to six weeks before they must make their first house payment. The money they save is usually enough to cover the closing costs.