Home Buying in Ypsilanti>Question Details

Christina, Home Buyer in Wilmington, DE

Making an offer on a bank owned property in Ypsilanti, Michigan

Asked by Christina, Wilmington, DE Tue Nov 18, 2008

The bank who owns the property requires you to be pre-approved through them. When making the application, the bank representative told me to bid $3,000 more than the asking price, but then to ask for a 6% sellers concession in my offer to cover some of the closing costs and for needed repairs to the property. Although I understand the concept, I'm not totally certain that I completely understand what a "seller's concession" actually means. Any advice would be helpful.

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Good Evening,
Christina, the listing agent represents the Bank not you the buyer. What it appears is she is asking you to come in at full price and will then turn around and ask the bank for 3% back to cover some of your closing cost. If you were represented by a Buyers Agent you may have been able to purchase it for less along with a concession. The bottom line is - you may not have not required helped and could have used the money to reduce the price instead.

Not all banks will allow you to use their proceeds to close but it appears this one does.

Bottomline, you really don't have anyone protecting your interest.
As for Pre-approval. You can use any lender of your choice however I have heard in our office meeting today that if the bank is Countrywide they are offering an incentive for conventional loans (not sure about FHA or VA) meaning they will pay some money towards closing cost which is a good thing.
If you have any other questions you email me. (rsimms@kw.com)
Rose Simms
Keller Williams Realty
Northville, Michigan
Web Reference: http://www.rosesimms.com
0 votes Thank Flag Link Tue Nov 18, 2008
Christina, a sellers concession is a credit given to you at closing by the seller. usually mortgage companies will only allow 3% back from the seller. You use the credit towards points, closing fees, taxes or escrow funds. You should do two things. First get your self preapproved through a local and trusted mortgage broker, they can tell you what program you qualify for and what limit you can get with that program towards closing costs. The second thing is you really should have a buyer broker looking out for you. The listing agent represents the bank not you. you can sign a buyer broker who is experienced in foreclosures at no cost to you, they get paid at closing by the listing agent from the fee offered in MLS at closing. this way someone can guide you through each step of the buying process including making a good offer. Good luck with your purchase.
Web Reference: http://www.ScottSellsNH.com
0 votes Thank Flag Link Tue Nov 18, 2008
I agree with Maria. They can make get pre-approved by them to make sure you are a good buyer but they can't force you to use them. It doesn't sound like you have your own agent, is that true? Most buyer's agent don't charge you anything extra, they get paid by the seller and work for you with full confidentiality. Your ride will be a lot smother with a BA that is knowledgeable in buying foreclosures.

To answer the question- Seller concessions is basically the seller paying for some of your costs. They take the proceeds from the sale, or their own money, and pay for things like mortgage closing costs, down payment, repairs etc. Putting a % on it won't fly for long with some banks, they need exact $ but its good in a first offer. You should be offering Market Value for the home, based on comps from the area. Don't go by what they are asking and certainly don't go by what a non-Realtor is telling, especially if they are working for the seller directly without Realtor code of ethics, and realtor laws to safeguard you, the buyer.

As for advice- Other then you need someone fighting on your side- I would have to say if you don't need the seller concessions in order to get the mortgage approved don't do it. If you have the cash for closing your mortgage then don't do the concessions. What happens when you do concessions is you are kind of putting up the money with your mortgage to give it to the seller so that they can give it back to you when they pay for your closing, or what ever you use your concessions for. So you will be paying interest on those concessions for 30 yrs, or for how ever long your mortgage is for. So again if you don't NEED them don't take them.
0 votes Thank Flag Link Tue Nov 18, 2008
Your wisest course of action is to get a buyer's agent to help you determine value, write the contract and negotiate with the bank. The seller (bank) can require you to be pre-approved through them but you are not obligated to use them to secure your mortgage. Your agent can assist with helping you find the best mortgage for you. Not the bank. The bank does not care about you and their addenda will be lengthy and disadvantageous to any buyer.
Web Reference: http://MariaSellsKC.com
0 votes Thank Flag Link Tue Nov 18, 2008
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