FHA Seller Concessions

[Terrel L. Shields]

My solution is "dollar for dollar and no one will holler." lol

Works for me...

<moderator edit> you Kinney.

Off your meds, Can?

 

[CANative]

Works for me...

Off your meds, Can?

No. I just didn't like his unprofessional reply to my post.

 

[Terrel L. Shields]

Tit for tat I suppose

 

[CANative]

Tit for tat I suppose

I prefer teat for tat when posting in G-rated forums.

 

[Terrel L. Shields]

Brings back memories...memories I'd rather forget... cold frosty mornings, wet hands, freezing cold and cats running under a cow and its tail tickling the cow's belly which she reacts to by kicking you... This kid has the right idea, tie their leg up

 

[Elliott]

So (trying to get on topic again), so here's a little thought experiment. A seller lists his property for $200,000 and after two weeks he get's two offers from two different realtors. One offer is for $200,000 and the buyer wants the seller to pay $6,000 toward closing costs. The other offer is a cash offer, but its for $198,000, with no concessions.

1. Which offer do you think the seller is going to take?

2. If the cash offer buyer backed out after the home inspection, and the seller took the $200,000 back up offer and paid $6000 of the buyer's closing costs, and you used the sale as a comparable, would you adjust for the $6,000?

 

[Terrel L. Shields]

paid $6000 of the buyer's closing costs, and you used the sale as a comparable, would you adjust for the $6,000?

Why not? a cash buyer that backs out wasn't serious to begin with.

 

[Randolph Kinney]

<Moderator edit> you Kinney. You still have not answered the OPs question nor offered a solution as to how to go about doing that. It's not reasonable to expect residential appraisers to call the sellers and buyers and interview them about their transaction. And when you ask a listing or selling agent "what would that property have sold for without the concession" I can image the saying several things, none of which would be helpful, must less polite.

For the most part 3% concessions or credits for closing costs is less than the market noise and variances in how buyers and sellers negotiate their individual transactions. Dollar for dollar at that level is neither too high nor too low to criticize because there is just no market data to make the case.

And you are the guy that preaches about the new FHA handbook too.

How many of the comparable sales sold with concession and what was the dollar range of those concessions? Appraiser’s analysis of observable and supportable market trends and expectations

Since there were sales without concessions, how do they compare to sales with concessions? The adjustment should reflect the difference between the sales price with the Sales Concessions, and what the Property would have sold for without the concessions

So the question is, would the sale happen without the concession at that price? The Appraiser must clearly state how and to what extent the sale was verified

So in your case, dollar for dollar works. As long as you show your work to support that (according to the FHA handbook), all is well.

 

[CANative]

 

[Tom D]

"Appraisers are required on HECM loans, by FHA, to make market-based adjustments to comparable sales for any sales or financing concession that may have impacted the sale price. These adjustments should be expressed in terms of cash or cash equivalency. The adjustment for each comparable sale must reflect the difference between the sales price with the sales concession and what the property would have sold for without the sales concession. The estimate of the market value represents an all-cash price to the seller. This assumes that typical buyers will take advantage of the most favorable mortgage financing available in order to pay the seller all cash. The estimate does not assume that the seller will finance the buyer in part or in whole."
this is for reverse mortgages, makes sense. FHA wants to lend on a cash value. i see many appraisers missing this on those reverse mort appraisals. i don't remember where i got that paragraph from.

on a sale i might react different to concessions if the comps have them. my feeling now-a-days is that concessions seem to be added to an offer creating a higher sale price, which may be common. the sale price would be lower with lower sales concessions. so i look at subject concessions verses comps concessions if a sale is involved.