"IPCs provide an incentive for a borrower to purchase a particular property, and in certain real estate markets, IPCs may be used to artificially inflate or maintain the sales price of a property. Fannie Mae has established definitive terms for what constitutes an IPC, specific limits on the use and permissible amounts of IPCs, and how IPCs in excess of permissible limits must be treated. These guidelines are designed to help avoid practices that may distort or artificially inflate the market value of properties."

The point of HVCC is to prevent home values to be artificially inflated...which is exactly what the builder is trying to do with these types of incentives.

Hi Andrew,

Quick question , if/when this transaction does go to closing, what would be listed as sellers consessions?

Andrew,
Agreed, no real benefit to the buyer but if builder is very concerned about the "sales price in records" then buyer could just use it as a tool in negotiation and get the house at a right price. it's like window-dressing that is common on wall st.
mispresentation? depends, even the make-ups and wigs girls wear can be considered mis-presentation. sorry if this sounds like a blog/chat session.
Thanks for your time and insight.

I don't see what is in it for the buyer and I do think that it will eventially be addressed. It seems to me that it is misrepresenting the value of the home.

Andrew, thanks for the fanniemae doc. It actually lists the incentives I was looking for. From the doc looks like IPC's are not illegal if disclosed to the lender. of course they should be reasonable. In our hypothetical example IPC's are less than 9% of value. The down payment goes from 37k to 64k which i guess is Ok(provided buyer has 64k to for d/p) because that 27k comes back to the buyer within a year as cash and savings on prop tax/asso fees.
I think if the builder does that routinely rather than exception then he could get in trouble.

Joe on a $400,000 purchase price and the IPC's you propose the lender will view the sales price as $373,000. If you are putting 10% down your down payment on $400,000 would be $40,000. With the IPC's your downpayment would be $37,300 + the difference between $373,000 and $400,000 (27,000).

I just don't see a benefit to the buyer.

Hi Kelli, the "free car" is not a myth, builders in CA have given not a civic but brand new BMW's to buyers because in some cases they had agreements with past buyers about reimbursement if they sell similar houses for lower prices.
http://www.marketwatch.com/story/home-builders-dangle-incent…

But like andrew said, incetives affects the LTV ratio so lender may not lend enough forcing buyer to make higher down payment. I am OK with higher down payment as long as it is not illegal.

Read the Fannie Mae Announcement on IPC's

I have never seen a car thrown in! I have seen sellers willing to pay condo fees and taxes, and builders throwing in new HD t.v.'s Is he willing to do this? I would contact a real estate atty. to verify. Before you do this, I would ask the builder if this is something he/she would be something they would consider.

What you propose may not be legal.

The lender needs to be aware of the car and the first years association fees, and the first years taxes. Those would be considered interested Party Contributions and the loan amount and loan to value would need to be adjusted down based on the amounts of those contributions. If you do not disclose those items to the lender then it is illegal.