Yet Another Seller Concession Question

[timd354]

That's exactly what I am saying...which reinforces that the price of what actually happens, is what we adjust for, not some theoretical what seller would have done otherwise (since they did what they did to get it sold in a reasonable time frame)

What actually happened in your scenario is that the seller would have accepted an offer of $160,000 with no concessions so the $5k concession resulted in the sale price being affected by the $5k concession in the amount of (surprise) $5k. On the other side of the transaction, the borrower who made an offer of $165,000 with a $5k concession only would have offered $160,000 if no concession was built into the offer.

Anyone who thinks otherwise in most cases is simply not in touch with reality.

 

[timd354]

To be more specific, when they qualify a buyer, that means the total cash to close includes down payment and buyer having enough cash for closing costs?

I am asking it for a reason...the fact that many people here say sales to a cash strapped buyer would not/could not occur without the seller offering a concession...if even a cash strapped buyer has to qualify with enough cash to close above a low down payment, then the concession offers the buyer some relief, some wiggle room (moving costs, bank account not totally depleted, a bit of money for upgrade etc, but technically, the sale could occur without seller offering a concession.

Some buyers would not be able to complete the purchase without the seller help, but so what? What difference does it make to market value weather or not the seller concession leaves some buyers with a little bit of reserves or weather some buyers need every penny just to close the transaction? There is no market where every buyer cannot qualify and close the transaction without a seller concession.

 

[J Grant]

Some buyers would not be able to complete the purchase without the seller help, but so what? What difference does it make to market value weather or not the seller concession leaves some buyers with a little bit of reserves or weather some buyers need every penny just to close the transaction? There is no market where every buyer cannot qualify and close the transaction without a seller concession.

If that is the case, then lenders are not qualifying these buyers properly...but you just said that in order to get a mortgage, even a low cash buyer has to qualify with enough down payment and cash to close, so which is it?

Asking from an interest point about the realities of the market...

 

[residentialguy]

The point is, in theory he would not reject it since its same money in his pocket,

It's not a theory, it's common sense and verified fact from their agent. Any seller that would reject an offer in lieu of the hopes that an offer might come up that paid him/her the exact net would not be well advice, not acting prudently, and not acting in their best interest

 

[J Grant]

What actually happened in your scenario is that the seller would have accepted an offer of $160,000 with no concessions so the $5k concession resulted in the sale price being affected by the $5k concession in the amount of (surprise) $5k. On the other side of the transaction, the borrower who made an offer of $165,000 with a $5k concession only would have offered $160,000 if no concession was built into the offer.

Anyone who thinks otherwise in most cases is simply not in touch with reality.

We all agree about the above, which proves my point ( what your point is I am not sure). My point is that we have to comply with what the certs and fannie /other guidelines say, that for concessions appraisers adjust for for market price reaction to PRICE, not net to seller, and not what seller would have netted had they sold without a concession. If net to seller differential is also the market reaction to price, then its $ for $ equivalent adjustment

 

[residentialguy]

that for concessions appraisers adjust for for market price reaction to PRICE

Show me a sale where you say the concessions were not dollar for dollar and no kick back to the seller, I'll show you a sale that you didn't bother to verify.

 

[timd354]

If net to seller differential is also the market reaction to price, then its $ for $ equivalent adjustment

It always is in every market that I have appraised in and anyone who thinks that it is not 99.9% of the time has an alternate view of reality.

 

[timd354]

If that is the case, then lenders are not qualifying these buyers properly...but you just said that in order to get a mortgage, even a low cash buyer has to qualify with enough down payment and cash to close, so which is it?

Asking from an interest point about the realities of the market...

Lending guidelines are readily available at no charge online...you should take the time to read them if you are interested in learning more about that part of the business. Available "Cash to close" is jargon on the lending side that includes funds to close from all allowable sources available. Allowable sources obviously would include the borrower's own funds, but also includes funds from other allowable sources (some examples of allowable sources include gift funds from a relative, concessions [for closing costs but not down payment], certain types of grants, loans secured by other assets, etc.)

 

[J Grant]

Show me a sale where you say the concessions were not dollar for dollar and no kick back to the seller, I'll show you a sale that you didn't bother to verify.

Again, we adjust for price..not net to seller .I've seen prices where the concession did not raise the price above other prices with no concessions, and I've seen sale prices where price was inflated above $ concession amount for the contributory value of the cash back to buyer. But often it is $ for $.

 

[J Grant]

I'm aware of lender guidelines, I asked for for your personal knowledge response on this thread about qualifications to make a point.

The point is, we see a number of posts on the topic where appraisers say the sale could not take place without the concession, since buyer lacks enougn for a cash downpayment or cash to close. If that were true, then the buyer was not qualified for the loan... and no RE agent or seller who is knowelddable will put forth an offer let alone accept a financed offer without a qualification letter from a lender for the borrower