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If you include a sellers concession of 5 percent in a sales contract is the selling price the amount before or after the concession?
Wiki User
∙ 8y ago
If one does a seller concession, it might be wise to specify in the contract that the realtors agree to base the commission on the sales price minus the concession. I do believe that this is a poor tool to use and is often used in attempt to jack-up realtor commissions, attempt a near-form of bank fraud, and further put someone in a loan they obviously cannot realistically afford at a questionable appraised value, which is part of what caused the troubled marketplace and a large number of families to find themselves in a foreclosure situation
The exact market convention will vary by country or region.
In the US the sale price is the agreed number which is listed as the sale price. Seller concessions and other adjustments can exist and they do not change the sale price. How much the borrower brings to the table and how much the seller walks away with after the dust has settled does not change the sale price.
A lender will want to know the details or will cap the concessions in the US. If there is no lender involved the buyer and seller can agree anything they want. Even if there is a lender involved the sale price does not change. The lender makes its own decision in underwriting as to if they want to fund the deal.
US appraisers are trained to take into account the concessions when determining their estimate of value. Note that they are estimating based on other transactions. If many of the other transactions have the same concessions then the value is less likely to be adjusted compared to a sale that is not similar to all the other comparable. At the end of the day the appraiser is offering an opinion. The true value is what a buyer will pay to a seller when the buyer and seller are conducting an arm's length transaction and there are no other factors significantly influencing the price agreed (the sale price).
Mortgage fraud and other issues may be more common when there are concessions or other adjustments to the sale price. That does not mean that all seller concessions indicate mortgage fraud or that seller concessions are material to the sale price vs. value.
Market conventions change with market conditions and changing business or legal details. 15% gifted deposits were common and legal in the UK at one time. Now the market practice is to take the gifted deposit off the sale price when computing the loan amount. The sale price remains the same but the lenders have lowered what they will lend. Things change based on new ideas.
Wiki User
∙ 8y ago
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I am not quite sure what the question exactly pertains to, as far as "fees". If by fees you mean closing costs then yes you can. In a purchase you can include your closing costs into the loan by getting what is known as a "sellers concession" Basically the closing costs are added to the purchase price and that is now the new purchase price. To do that first off you have to get the seller to agree to let you do that. Secondly the home must appraise for that amount. Say for eample you are buying a home for 100,000 your closing costs are 5,000. The new purchase price with a full sellers concession is 105,000 on the contract, on your mortgage and on the appraisal. The house must appraise for atleast 105,000, if it appraises for 100,000 then you can't do it. It has to be written in the contract and the seller must agree because they are conceding they could have sold the home for 105,000 but they are selling it for 100,000 and letting the buyer include their closing costs. Sellers concessions can cover all or half of the closing costs. In a refinance you can roll your closing costs into the refinance as long as your loan to value doesn't go over 100%, though some banks will go as high as 125% on your loan to value though I don't recommend it in most cases. Loan to value is your current debt on the home divided by its current market value. A home worth 100,000 with a 50,000 mortgage has a LTV of 50%.
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