What happens if seller credit is over the 3% allowed?

Asked by Chad Beamesderfer, Ramona, CA Sat May 10, 2014

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Sinead McAllister’s answer
Sinead McAll…, Agent, Oceanside, CA
Sun May 11, 2014
Hi Chad,
It's hard to say without knowing the specifics of your transaction. From your question, it doesn't sound like you have an agent representing you. If you can't work something out with the seller, and cancel, I would seriously consider getting representation before you enter into a contract on another home. If the seller agrees to $10K in closing costs, that shouldn't be too big of an issue. Your closing costs really shouldn't be too much more than 3%. The $5K in flooring is tricky. They're just going to give you $5K in your pocket. Lenders will rarely allow that. Is it new construction? In new build situations, you can sometimes finance flooring. Another option is trying to work out an escrow hold back on the flooring. Some lenders will allow that. If none of those options are available, I agree with Dan. Ask the seller to reduce the price, so that you are still getting what the seller agreed to (their bottom line doesn't change, if anything, all expenses based on purchase price i.e. commission, title/escrow fees, will go down a little), and save for the new flooring OR get a credit card (AFTER closing, don't ruin your loan approval!) and put the flooring in yourself.

Feel free to call me if you have any other questions.

Thanks!
?Sinead McAllister-Clifford
Real Estate Broker/ RealtorĀ®

McAllister Homes Real Estate
Residential Sales & Property Management
http://www.McAllisterHomes.com
License 01366009
858-205-5215 CELL
info@mcallisterhomes.com EMAIL
0 votes
Dan Tabit, Agent, Issaquah, WA
Sun May 11, 2014
Chad,
Lenders won't let any money go to the buyers. All a seller can do is pay your allowable closing costs and anything beyond that goes back to the seller.
You need to restructure this deal. If the seller will install the flooring before the deal closes, you may be okay. If you have the cash to do the floor, just reduce the price the amount you wanted for a credit, that way you're not paying interest on it for 30 years.
0 votes
Scott Godzyk, Agent, Manchester, NH
Sun May 11, 2014
before making any offer you should have known this from both your buyer agent and your loan officer. It is a standard percentage. Anything over it has to be worded in your offer differently. The seller can pay for the work in advance for the floors. You may have a problem with your mortgage company or bank as it is a red flag if you have information in your offer about the flooring needing replacement, again your agent should be assisting you in writing a proper offer.
0 votes
Chad Beamesd…, Home Buyer, Ramona, CA
Sat May 10, 2014
To expand on this. We are in escrow starting Friday. I spoke with my lender, and they just informed me that because we are doing a conventional 5% down loan that the seller credit maxes at 3%. They agreed to 10k for closing and 5k for flooring. In light of this news I feel I will have to back out of escrow so I dont lose the earnest money deposit. Or does something else happen with this?
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