Buyers need a good lender!
Lenders and the new commission rules: The following information is courtesy of Kevin Budde with Monarch Coast Financial. He’s always got good info to pass along! Because many buyers may be unable to pay their buyers commission, it may be possible to roll that commission into the loan, via seller concessions. Hire a GOOD lender, and listen to their advice! If you are looking to buy or sell in the Coachella Valley, give Kim Kelly a call at 760-285-3578.
Seller Concessions
Due to the National Association of Realtors (NAR) commission settlement agreement, I have been fielding a lot of phone calls from realtors asking how this is going to affect Interested Party Contributions (IPCs) also known as Seller Concessions.
Prior to the settlement agreement, Seller Concessions were only thought of as an agreement where the seller agreed to pay certain costs on behalf of the buyer. These costs include a variety of expenses such as discount points, appraisal fees, temporary interest rate buydowns, title insurance, escrow fees and even prepaid interest and insurance. Concessions cannot be used for the down payment.
Under the settlement agreement, rather than the listing broker paying the buyer agent’s commission, the seller has the choice to offer compensation to the buyer’s agent directly. Listing brokers are no longer showing buyer agent commissions in the Multiple Listing Service (MLS) and the term used in contracts is Seller Concessions. This has raised questions and created confusion in the real estate community.
Lenders in the federal financial sector like Fannie Mae, Freddie Mac, the Federal Housing Administration (FHA) and the Veterans Administration (VA) have limitations on the amount allowed as Seller Concessions. Fortunately, the agencies all agreed to exempt the buyer’s agent commission paid by the seller from the limits of what is allowed toward the paid buyer’s costs.
Conventional loans, depending on the down payment, allow 2 percent to 9 percent of the loan amounts to be Seller Concessions. FHA allows up to 6 percent and VA allows up to 4 percent. The total amount of Seller Concessions cannot exceed the total amount of all closing costs.
These limits and restrictions highlight the importance of working closely with a mortgage expert to navigate the Seller Concessions effectively in real estate transactions. To contact Kevin directly, call him at 949-422-2075.
