Yet Another Seller Concession Question

[Mike Garrett RAA]

And we can argue this until the cows come home with no consensus of opinion. I suggest you do what you feel you need to do and let it go. Oh wait.,..that sounds like a song from a recent movie.

Couple of points in reading the last 6 pages of this thread.

In reference to contract for deed sales, two points. The first is some sellers are looking at tax consequences and also interest rates. I have seen a few deals where the seller was able to more than double the amount of interest by doing a contract for deed.

This is to timid. Not to be picky but it's whether not weather as used in your posts.

Hope everyone is enjoying the weather...it's been great here but it might snow this Thursday and Friday. To be expected...I'll be fishing our first tournament of the year on Saturday.

 

[timd354]

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

There are definitely cases where the buyer would not qualify without the seller concession and lenders take that into account when they pre-qualify borrowers and issue qualification letters, which if the lender is smart will have language regarding the contract price, loan terms (including loan amount) and reference the seller concession. As a lender there is nothing wrong with qualifying such borrowers if it is done correctly. Now, whether such borrowers (who would not qualify but for the seller concession) should be eligible to qualify for a loan is a whole different conversation, but I don't blame the lenders for qualifying such borrowers when the GSE's and FHA will accept these loans.

 

[timd354]

This is to timid. Not to be picky but it's whether not weather as used in your posts..

yep...i hate the auto spell/auto complete function although sometimes I just can't type worth a darn

 

[J Grant]

There are definitely cases where the buyer would not qualify without the seller concession and lenders take that into account when they pre-qualify borrowers and issue qualification letters, which if the lender is smart will have language regarding the contract price, loan terms (including loan amount) and reference the seller concession. As a lender there is nothing wrong with qualifying such borrowers if it is done correctly. Now, whether such borrowers (who would not qualify but for the seller concession) should be eligible to qualify for a loan is a whole different conversation, but I don't blame the lenders for qualifying such borrowers when the GSE's and FHA will accept these loans.

Thanks for the clarification...a bit scary..and how prevalent is it? Aka, how does a lender do this "correctly"...I presume good income/credit?

The whole system is flawed...including allowing 6% RE commissions to be rolled into price...the commission really is financed by buyer as a price increase even though it is spun as the seller "paying" it

 

[timd354]

Thanks for the clarification...a bit scary..and how prevalent is it? Aka, how does a lender do this "correctly"...I presume good income/credit?

The whole system is flawed...including allowing 6% RE commissions to be rolled into price...the commission really is financed by buyer as a price increase even though it is spun as the seller "paying" it

The lender will typically run the borrower's attributes through an automated underwriting system (AUS) that is accepted by the GSE's or FHA (i.e, Fannie's Desktop Underwriter) and if they get an approval, they know that they will be able to sell the loan if they process the loan correctly and verify all of the borrower's information that was entered in the AUS and meet all of the conditions of the AUS approval.

I don't have any concerns about the 6% commission...yes, it affects the listing price that seller agrees to list the property for and the ultimate sale price a seller will accept, but the eventual sale price does reflect what a buyer is willing to pay for the property (whether or not that price includes a built in commission).

 

[Mr Rex]

6% commission is industry standard and market accepted. Concessions are like wild cards in a deck of cards or playing crazy 8's. No rhyme or reason except to make the game less predictable and easier for the novice to win every so often. Is this what the RE industry should aspire to? Crazy 8's?