FHA Seller Concessions

[CANative]

OTOH, RE agents can be a-holes. On that same assignment (now on hold) the subject was in a C2 district and my HBU was looking like it could go either way. The RE agent kept calling and bugging me about stuff and wanted to make sure I found sales of similar houses in the C2 district. I asked the Planning staff about rebuilding as a house or commercial property and initially all they told me was that it was grandfathered so it could be rebuilt (they're overwhelmed due to a major fire during the summer). So I kept on forging ahead while the lender, the AMC (because they had to) and the RE agent kept nagging me for the report. My first MLS search didn't turn up any sales of this property ever but I could see a sale in the public record from a year and a half ago.

Then I got the bright idea to search for in the MLS commercial listings and found it. Sold as an office... by the same freaking RE agent.

So it took me almost a week to get in touch with a planner again and I asked different questions. Apparently there is a thing in the zoning ordinance regarding abandonment (not occupied for over a year) and when that happens the property must be used for the conforming use which would be commercial.

 

[bnmappraisal]

OTOH, RE agents can be a-holes. On that same assignment (now on hold) the subject was in a C2 district and my HBU was looking like it could go either way. The RE agent kept calling and bugging me about stuff and wanted to make sure I found sales of similar houses in the C2 district. I asked the Planning staff about rebuilding as a house or commercial property and initially all they told me was that it was grandfathered so it could be rebuilt (they're overwhelmed due to a major fire during the summer). So I kept on forging ahead while the lender, the AMC (because they had to) and the RE agent kept nagging me for the report. My first MLS search didn't turn up any sales of this property ever but I could see a sale in the public record from a year and a half ago.

Then I got the bright idea to search for in the MLS commercial listings and found it. Sold as an office... by the same freaking RE agent.

So it took me almost a week to get in touch with a planner again and I asked different questions. Apparently there is a thing in the zoning ordinance regarding abandonment (not occupied for over a year) and when that happens the property must be used for the conforming use which would be commercial.

... due diligence

...and clients (ESPECIALLY AMC's) wonder why we can't turn a report over in 48 hrs????

 

[VegasJim]

Thank you for all the posts. There is definitely a wide range of opinions, some of which I agree with and some I don't. I believe I will take Canative's advice and do a dollar for dollar adjustment for the concessions. I have always tried to include an explanation for everything I do within my report, but this is obviously not acceptable to HUD.

 

[Jim Onderisin]

Ask the selling and listing agents whether the concessions motivated buyers to pay a little more. Sometimes they'll tell you the amount was not really a concession but an amount to cover repairs agreed to at closing. Should you adjust for that? Sometimes the listing agent will tell you the concession did not induce the buyer to pay more but the selling agent will say it did. Interesting stuff.

 

[Peter LeQuire]

On numerous occasions, I've tried to establish a basis for other than a dollar-for-dollar adjustment for concessions. The process generally involved trying to establish what a "normal" sales price to list price percentage was; compare the normal % to the % in the comparable and adjust for any difference. Great. Logical? I think so - others don't. This method breaks down because one gets lost in trying to establish what "normal" is when the population of sales in the market include concessions - or don't - and "normal" cannot be quantified.

In verifying concessions, I routinely ask to what extent the concessions affected the price: alternatively, I'll phrase it by asking what the price would have been without concessions. Except for those relatively few occasions when there were multiple offers and the property sold for more than list price, the answers have overwhelmingly been "dollar for dollar". Around here, in my experience, USDA and Rural Housing loans, and FHA loans that sell for full price, always have significant concessions .