Seattle Residential: I Do That: Maximum Seller Concession for Buyer's Loan

Maximum Seller Concession for Buyer's Loan

What is the maximum Seller Concession for a Buyer's Loan?

Well, that depends, and it's always best to consult with the Buyer's lender before your offer includes promises your lender can't keep. When you are negotiating for a buyer, keep the following in mind.

 Type of Loan LTC/CLTV Maximum Seller Concession Allowed
Conventional Primary and 2nd Homes Over 90% 3%
Conventional Primary and 2nd Homes 75-89.99% 6%
Conventional Primary and 2nd Homes Under 75% 9%
Conventional Non-Owner Occupied N/A 2%
FHA N/A 6%
VA N/A 4% Maximum for prepaid closing costs, funding fee & debt payoff

This information provided by Eileen Burke with Cobalt Mortgage in Seattle, a preferred lender.

Eileen also counsels that Seller concessions can not be paid in cash to the buyer, so if you are leaving money on the table, apply it to future home owner's insurance, property taxes, or *HOA dues.

We are in a very unusual market. For listings where the Sellers properly prepare the home and agree to list at a price the market recognizes as current, we are seeing very short market times and multiple offers. The other half of the market consists of homes that were priced too high originally and/or the Sellers are unwilling to lower them. It's this homes that the seller is often willing to assist the buyer in making the loan more attractive and sometimes just possible.

Representing a Buyer involves getting the best deal possible and this is one avenue to explore.

Representing a Seller and suggesting a Seller contribution in a counter offer may just be the ingredient that makes for a happy transaction.

 

 

 

 

Glenn Roberts
Retired

 

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Comment balloon 16 commentsGlenn Roberts • April 29 2011 03:48PM

Comments

This is some great information.  There are a lot of agents out there who may not know the maximum amount for a seller contribution.  Listing agents should also inform their sellers of what types of contributions a buyer may ask for. 

Posted by Brenda Mullen, Your San Antonio TX Real Estate Agent!! (RE/MAX Access) over 7 years ago

Brenda - I always knew there were various limits but never new they fell so neatly in groups.

Posted by Glenn Roberts (Retired) over 7 years ago

David - I saw an out of bounds request a while back and it makes for difficult understanding for the buyer at closing. "But you promised." Then i saw this table.

Posted by Glenn Roberts (Retired) over 7 years ago

Great info Glenn!  It is important to also know that one cannot apply more than the standard amount for future taxes/insurance or HOA dues, meaning you cannot apply these funds to pay for insurace beyond 12 months.  Use it or lose it.  If you choose to pay up front mortgage insurance it has to be paid in full!

Posted by Nevin Williams, Senior Mortgage Advisor (Fairway Independent Mortgage Corporation) over 7 years ago

Nevin - Thanks for that info. Once, long ago, I got too much for a buyer and he was a little disappointed that we earned it but didn't get it.

Posted by Glenn Roberts (Retired) over 7 years ago

Glenn - With the FHA loans I have dealt with, only non-recurring closing costs were allowed. Anything left on the table went back to the seller. We asked for 3% on one of the deals and we had $700 left over that we couldn't use.

Posted by Cynthia Larsen, Independent Broker Serving Sonoma County, CA (Safe Haven Realty) over 7 years ago

I've had deals where some of the money couldn't be used. I'm sure things can vary from lender to lender, but I don't know why. Maybe some lender will chime in and let us know why that is.

Posted by Glenn Roberts (Retired) over 7 years ago

Glenn,

The contract of sale in Maryland puts the onus on the buyer to make sure that any concessions are acceptable to their lender. Asking for too much and not being able to use it can be frustrating.

Rich

Posted by Richard Iarossi, Crofton MD Real Estate, Annapolis MD Real Estate (Coldwell Banker Residential Brokerage) over 7 years ago

Rich - That would be money left on the table by the Buyer. And egg on the face of the agent or lender who got the contract wrong.

Posted by Glenn Roberts (Retired) over 7 years ago

I am of the habit of picking up the phone and calling the LO when drafting an offer or counter to make sure which loan garanimal we're dealing with on a particular home or buyer or seller.  Seems in the loan industry these days things change faster than I can learn them.  And I had no idea until recently that sellers could pay up to 9% with 25% down. 

Posted by Tammy Lankford,, Broker GA Lake Sinclair/Eatonton/Milledgeville (Lane Realty Eatonton, GA Lake Sinclair, Milledgeville, 706-485-9668) over 7 years ago

I have a hard time believing that a person can be a Realtor and keep up with changes in lending parameters. So I don't. Call the lender. That's the key.

Posted by Glenn Roberts (Retired) over 7 years ago

Glenn, there is a lot to know for sure and buyers need us to know it...or who to call.

Posted by Charles Edwards Bentonville, AR REALTOR, Bentonville Real Estate Agent and Broker (Coldwell Banker Harris McHaney & Faucette 479-253-3796 ) over 7 years ago

Charles - One never knows when we'll have to have certain odd facts.

Posted by Glenn Roberts (Retired) over 7 years ago

Glenn, this is a handy little graph that I can use daily, thank you! 

Posted by Paul S. Henderson, REALTOR®, CRS, Tacoma Washington Agent/Broker & Market Authority! (RE/MAX Northwest.) over 7 years ago

You're welcome, Paul. I wish I could use it daily.

Posted by Glenn Roberts (Retired) over 7 years ago

Great graph Glen,  I have and will likely continue to rely on the lender to tell me what I can use for each  buyer, however this is great info.  I can now have a conversation with buyers about their options in the early stages.

Posted by Brian Clinger, Brian Clinger ABR, GRI, CRS, SRES (Coldwell Banker AJS Schmidt) over 4 years ago

Participate