Pre-paids = seller concession?

[Jim Vincent]

I have an underwriter saying that "seller to pay $5000 in closing costs and prepaid fees" does not constitute a seller concession and "remove language pertaining to seller concession" from the report.
When I questioned the underwriter & client liason about it, as that sounded like the definition of a concession, I received an explanation that "There is a difference in closing cost vs seller's concession. It all depends on what the loan program will allow."...and as this is an FHA loan, that is 3% of the prospective loan or probably ~$4400 and that "anyway it is best just to change it per the underwriter"

This sounds awfully fishy to me.

 

[NORTON]

I have an underwriter saying that "seller to pay $5000 in closing costs and prepaid fees" does not constitute a seller concession and "remove language pertaining to seller concession" from the report.
When I questioned the underwriter & client liason about it, as that sounded like the definition of a concession, I received an explanation that "There is a difference in closing cost vs seller's concession. It all depends on what the loan program will allow."...and as this is an FHA loan, that is 3% of the prospective loan or probably ~$4400 and that "anyway it is best just to change it per the underwriter"

This sounds awfully fishy to me.

the concept(s) they work under does not determine the definition for other real estate professionals....application does not dictate definition!...hopefully u got it in writing? if so, send it to HUD / FHA and let them be on the hook for their response...and then walk it into your state board and get their thoughts on it.....the last thing u want is 5 years from now someone says....u weren't diligent and now you're on the hook for a bad loan!

 

[Lee Lansford]

Either they totally do not know what they are doing or they're hoping that you are one totally pliable appraiser.

You know the right answer. Do the right thing.

 

[JSmith43]

Word to the wise: Use the terms seller paid closing costs and/or prepaid expenses (if applicable). This is a rookie UW or a seasoned UW suffering due to the greater fool theory being a sure bet in a large organization (a greater fool above her or reviewing her in the food chain).

Do not mention the term seller or sales concessions when talking about financing concessions. The problem is there are guidelines for seller paid closing costs and prepaid, but seller concessions can mean anything, I guess. They could refer to personal property that was included, like a riding lawn mower. There is inconsistent use of these terms in lending.

 

[Proactive]

“Appraisers are required to identify and report sales concessions and properly address and/or adjust the comparable sale transactions to account for sales concessions in the appraisal of all properties to be security for an FHA-insured loan.” (U.S. Department of Housing and Urban Development Mortgagee Letter 2005-02)

“Our definition of market value is intended to ensure that appraisals reflect an opinion of market value after adjustments for any special or creative financing or sales concessions—such as seller contributions, interest rate buydowns, etc.—have been made.” (Fannie Mae Selling Guide, Part XI, 205)

“Sales or financing concessions may have an effect on the price paid for a property. As such, it is important for the appraiser to recognize this and analyze their impact.” (The Appraisal Standards Board, USPAP Q&A, March 2007)

These are a few years old... I haven't checked to see if there is anything relevant that is more current.

 

[Jim Vincent]

Thank you very much for your comments. Yes, I have printed out the emails asking for this, to have a written record of it.
I've planned on retaining the specific language of the contract (seller paying closing costs & prepaid fees). The only lingering question is if that belongs in the URAR "Contract" section "is there any financial assistance..." Sure looks like Yes to me.

 

[Smokey Bear]

Are you talking about the subject contract or comps?

 

[Proactive]

Are you talking about the subject contract or comps?

Good catch Smokey; I didn't see that. Leave it to the lawyerly bear to see a different angle...

 

[Tony V]

Are you talking about the subject contract or comps?

That is one question

The second question is...
Is the underwriter requesting this the DE underwriter or the (if applicable) the AMC underwriter/reviewer or another type of reviewer??

 

[Calvin the Airedale]

Are you talking about the subject contract or comps?

What difference does it make? If it's in the comps, his obligation is to adjust out the contributory value of the concessions.

If it's in the subject deal, his obligation is to comment on the effect of the concessions on the sale price in the contract review section.