The gses and HUD just need to end the shet show on seller concessions.
If they are going allow say up to 3%, then we should only adjustment past 3%.
Below is the very old HUD handbook. They did a 180 when 4150.2 came out.
6-4. USE OF MARKET DATA CONCERNING BUYDOWNS AND INCENTIVES TO BUY. The
sales price of properties which offer the purchaser a cash refund by
means of a monthly payment reduction plan (buydown or similar
arrangement) is not to be used as comparable sales data unless the
worth of the total refund is deducted from the sales price to
reflect the true all cash payment to the seller. Appraisers must
make a dollar for dollar adjustment to comparables where the
seller's contribution exceeds limits established by HUD, currently
six percent.
A. Seller buydowns are payments for discount points, any type of
interest payments, or seller payment of closing costs normally
(under local market practice) paid by the buyer (including the
one percent loan origination fee). The sales price of the
comparable is selected as the base for making the adjustment in
order to simplify the process. To provide an abbreviated
example:
Sales Price of Comparable $75,000
Dollar Amount of Seller Buydowns: $8,750
Less: six percent of sales price 4,500 (excess) 4,250
______ _______
Adjusted Value of Comparable Property $70,750
To the extent possible appraisers should select comparable sales
from properties which sold without the benefit of various seller
buydowns in excess of six percent. When comparables are not
available without these types of incentives, adjustments must be
made to the sales price of the comparable to better reflect the
cash equivalent value of the property.
B. The instructions above, particularly the six percent allowance,
relate to seller buydowns as defined. Where sellers use other
known incentives such as trips, non-realty items, monthly
payments to principal, homeowner association or condominium
association fees, and similar gifts as inducements to purchase,
reductions in the sales price of the comparable must be made on
a dollar-for-dollar basis from the first dollar, without regard
to the six percent allowance. These instructions apply both to
new construction and sales of existing properties.
The appraiser will he responsible for making appropriate
notations on the URAR explaining all adjustments mad
