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, SRES*
Lake and Company Real Estate
206-524-3665
Seattle Residential ~ I Do That
Licensed broker since 1985 offering spectacular service to buyers and sellers in greater Seattle, with particular interest in Green Lake, Ballard, Phinney Ridge, Wallingford, Ravenna, Bryant, View Ridge, Roosevelt and the University District.
*Senior Real Estate Specialist
Referrals from past clients and other agents always make me smile.
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.
Brenda - I always knew there were various limits but never new they fell so neatly in groups.
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.
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!
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.
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.
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.
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
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.
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.
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.
Glenn, there is a lot to know for sure and buyers need us to know it...or who to call.
Charles - One never knows when we'll have to have certain odd facts.
Glenn, this is a handy little graph that I can use daily, thank you!
You're welcome, Paul. I wish I could use it daily.