Concessions or just lies?

[Jeff Horton]

I know this a common situation but first time in very long time I have been faced with it and just wondering how others handle this. New home in a new Subdivision. Appraisal is dirt simple, many sales of the similar and same floor plan.

Home is listed in MLS for 77.9K, contract is for 80.4K. Nothing extra added to the house. Obviously contract price is just jacked up to get get the 100% financing on the home and to cover the closing costs. No money out of the buyers pocket. Seller will pay up to $4500 in closing costs.

So exactly what do you disclose? Seller paid items would be 6% which is normal. The listing vs. contract price really bugs me but not sure how to address if it at all. I do so few sales I rarely run into this. Would appreciate any input.

 

[wyecoyote]

Would state the original listing price as $77.9K and sale price as $80.4K address the seller concessions. It appears from the list to sale price as a $2,500 concession, however, you state that it is $4,500 concession. Just state in the Seller paid concessions on page 1 of the URAR or 2055 as $zzz whatever, is in the P&S. And address it in the listing history and somewhere in the addendum. I don't adjust these in the market grid unless it is one of the sales that had a concession when it sold. IE.. if sale 1 sold for $88,000 with a $3,000 concession put it in the concessions box of the market grid then adjust there. This is what I do seller paid concessions are not typical in this area. Complete the report and let the market tell you what it is worth.

Ryan

 

[Randy Beigh]

Jeff

I agree with ryan. But, you mentioned an attempt to get 100% financing by this method. Not sure that would work with the amount of money involved. For instance, if the loan would typically be an 80% loan, adding $5,000 is not going to make it. They would have to add about $16,000. The type of situation you are talking about is fraud and is illegal. Adding for concessions is not.

Concessions or fraud, deal with the market and you won't go wrong. Try to justify an inflated sales price and you will go to jail.

It sounds like you have experience with the super inflated sales. Spokane had a mortgage company, realtor, and appraiser doing this for several years. It took a long time, but the authorities just pulled licenses for the realtor and appraiser. The mortgage company is now out of business. Unfortunately, the community is stuck with over 600 REO's that are directly attributable to this operation. I hope your community doesn't have to go through that.

 

[wyecoyote]

Randy,

I heard about the Spokane deal happening has that finally calmed down? Or is it still ongoing?

They may still be able to get 100% taking a first at 80% then a second at 20% but that is for the LO to deal with. Although I never agree with fully taking 100% I would like to see people put down at least 5% and pay there own closing costs. IMHO people with 100%+ financing are quicker to walk away from a house and let it go than someone with money down.

Ryan

 

[Pamela Crowley (Florida)]

Read the complete "Definition of Market Value" on the Statement of Limiting Conditions. Say what???? I do enjoy asking the Realtors and/or builders what they would accept for the property if they had a cash buyer. This always throws them and makes them stutter. "Excuse me, I need a little help here. It's listed for $79,000, the contract is for $82,000, and this little fact doesn't have any meaning? Does this mean that if you had a cash buyer for $79,000, you wouldn't accept it?"

Of course, the Appraisal Text Books (and USPAP - sort of) say to bring the comparable sales to "Cash Equivilent". ie: as if it had sold for cash. Another thing the lenders have changed for us.... I mean for themselves.

This brings up another good question. What about appraisals completed that are not for lending purposes and do not use the FNMA form 1004B definition. USPAP 2002, starting near the bottom of page 3. How about some more comments on the differences in the definition of Market Value and what it means to appraisals for purposes other than those completed with the FNMA form 1004B.

 

[Randy Beigh]

Ryan

The appraiser lost his license for 10 years, the agent gave up her license, and the company is out of business.

Looks like nobody is going to jail. Only in America.

 

[Jeff Horton]

Thanks for the input. I had decided what I was going to do and wanted to see if anyone else thought the same way. I just disclosed what I know. Listing price. cntract price and seller concessions and went from there.

As for the 100% financing my wording was not very good. The buyer is getting a FNMA 100% loan and I what I meant was it looks like they are just jacking up the sales contract to cover any money she should pay out of her pocket. Seller is offering to pay UPTO $4500 in closing costs. Again I am sure this is keep the buyer from having to shell out anything. And the contract showed a small amount as earnest money that was to be refunded at closing.

I agree that 100% financing is a bad deal to me. What has the buyer to loose if they walk out in a year? Virtually nothing.

 

[wyecoyote]

Randy,

To bad if they started putting people away and it got national attention perhaps some of the others out there would take notice and straighten up and fly right.

Ryan