Home Selling in Bronx>Question Details

Missy, Home Seller in Bronx, NY

What RealEstate or Bank regulation states that Seller's Concession is legal.?

Asked by Missy, Bronx, NY Thu May 8, 2008

Help the community by answering this question:

Answers

7
MISSY- Seller Concessions are legal and extremely helpful in this market.

When a Seller lowers his price by $10,000, it lowers a potential Buyer's monthly payment by about $50/month.

If the Seller offers a concession package for $10,000 the potential Buyer can utilize those funds to best suit his/her needs.
1.) Reduce Purchase Price.
2.) Pay closing costs
3.) Discount his Interest rate/payment
a.) for the life of the loan (Permanent Buydown)
b.) for the first two years. (Temporary Buydown) Lower payment by hundreds of dollars/month*
4.) Any combination of the above.

*Temporary Buydown Calculator: http://www.321advantage.com/buyers-calculate-your-rate

Learn why Standard Price Reductions are ineffective when it comes to increasing market potential and expanding your pool of qualified Buyers:
Web Reference: http://www.321advantage.com
0 votes Thank Flag Link Thu Jun 4, 2009
Ute's right. It's legal unless specifically prohibited. Often/usually, though, it's not an issue of law, but rather guidelines from the lender. All sorts of arrangements can take place between the buyer and seller. The seller can finance the entire deal; the seller can take back a second, and so forth. Heck, the seller can pay the buyer to take the home. (That occurs sometimes in "subject to" transactions.)
0 votes Thank Flag Link Thu May 22, 2008
Don Tepper, Real Estate Pro in Fairfax, VA
MVP'08
Contact
Missy, need help selling your property? Perhaps the people in your transaction or offer are not explaining the seller's concession properly. Think about it, would a bank ok a seller's concession if it were illegal? This is very common practice for buyers with only down payment and no closing or little closing funds. Contact me, I can help you sell your property.
0 votes Thank Flag Link Thu May 22, 2008
Hi Missy. It's the other way around. Unless there's a law that says that a seller concession is not legal, it's legal. It can't be under the table, but other than that, any reduction in price is essentially a seller concession and that's just part of the contract negotiations. To the extent that the seller concession is not expressed through just a lower purchase price, but buyer credits to be used for closing costs, down payment or repairs, the credits have to be within the lender's underwriting guidelines. Anywhere between 3 - 6% of the purchase price depending on which lender the buyer uses (e.g., conventional lenders usually only allow 3% while FHA will permit up to 6%). Seller concessions are essentially just an incentive for the buyer and the seller does not have to offer any and does not need to agree to those that the buyer may ask for in an offer, but the buyer will most likely move on to a different property if the seller is not willing to make some concessions. In the current market we see seller concessions a lot more than we did a few years ago and the buyers are taking advantage of them just like the sellers took advantage of the seller's market when they were able to sell their houses without having to make concessions.
0 votes Thank Flag Link Fri May 9, 2008
Ute Ferdig -…, Real Estate Pro in Newcastle, CA
MVP'08
Contact
Seller concessions are perfectly legal as long as they are within the lender's guidelines. Also, the property usually has to appraise for the increased amount, again depending upon the mortgage product. I personally feel that it is a dangerous practice for people who have marginal credit because you are already starting out owing more that the house may really be worth. If a market swings back a little in any given year within the first 3 years and you have to sell, you are upside down in your debt to value ratio. That is what is causing some of the problems we are currently seeing. It is also what is causing the Short-sale syndrome. When you are qualified for a mortgage, there are many factors that the bank does not use as debt or expenses that may impact or limit your ability to afford your monthly mortgage payment. Examples of those items are the cost of gasoline, utilities and child care, which can grow significantly beyond the household income during the life of the loan.
Good luck!
Joe Sorrentino
MJ Peterson Real Estate
888-807-1715
0 votes Thank Flag Link Thu May 8, 2008
Why would you think that it is not legal?
0 votes Thank Flag Link Thu May 8, 2008
What makes you think it is not legal?
0 votes Thank Flag Link Thu May 8, 2008
Search Advice
Ask our community a question
Email me when…

Learn more

Copyright © 2015 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer