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Hey, everyone. Couple quick ones here.

 

Crediting a buyer with seller concessions for on time payments to go towards closing costs. How does this work if, to me, it just sounds like a credit on paper? Okay we knock $3600 off the strike price to cover your closing costs. How?

 

Also, is the option consideration the t/b puts down to you also the down payment for their loan? I've heard it both ways. That, yes they can use it as their 3.5% down on an FHA, but others have said no, they have to come up with a "real" down payment down the line when they exercise.

 

 

 

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Hi, Jay. Apologies for not replying sooner. I was in the Keys for a few days of excessive behavior. :wacko: Just catching up now. . .

Not sure I understand your question regarding seller concessions. Can you be more specific?

Option consideration will be used according to the lender the t/b has chosen. In all likelihood, that money will be a credit towards the purchase price, rather than part of the down payment. You'll note that in the agreements we use they specifically state that the option money is a credit towards the purchase price. The reason being we don't want to make promises we can't keep, such as saying that option money is part of the purchaser's down payment. That's a sure fire lawsuit waiting to happen. Play it safe and tell the t/b that how their option money is used is up to their lender. Neither you nor the seller has any say in this matter.

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No worries. The Keys are amazing. Great diving there, and seven mile bridge is incredible to me.

 

Due to Dodd Frank, instead of offering rent credits, we've started using seller concessions as a credit to on time payments. So the t/b pays on time every month for say, 36 months, and gets $3600 as a credit. How is that $3600 used to cover the tenant buyers closing costs if its a credit on paper?

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Jay-

 

A seller concession can be for many things, and may include closing cost. I have seen buyers come back and ask if the seller would pay the buyer's closing cost. If agreed, the seller will increase the buyer's purchase price by the amount requested and update the purchase agreement with the modification. I would never tell a t/b that the concessions cover thier closing cost; in-fact, the t/b is resposible for all allowable closing cost.

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Jay, the seller's concession can be for whatever both parties agree to. Keep it simple. For example, seller agrees to a $3,600 concession requested by buyer for necessary repairs, or something similar. That won't raise any red flags or scrutiny and it is certainly legal.

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Ok, thank you guys. I didn't know they could be used all over the board. Really appreciate it.

 

With Dodd Frank, what's the norm on giving incentive to your t/bs to pay rent on time?

My attorney said capping rent credits at 20% "should be" fine, but I'd still prefer to avoid the heat if I could.

 

Especially after he phrased it "Should be"

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My attorney said capping rent credits at 20% "should be" fine. . .

 

Therein lies the problem. No one, not even those who "should" know, (attorneys), are certain of the law. Until a court case sets a precedent it is all speculation.

If you want to play it safe, don't offer rent credits. Instead, do as discussed above and offer seller concessions, instead.

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Thanks, MC. You oughta get a donation box rollin on this site! Or maybe a "subsidize my excessive behavior to the Keys - part two - fund" :lol:

 

You all are greatly appreciated.

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Sellers concede on their purchase price all time so a buyer will purchase. For me a monthly credit/concession is a marketing tool to get a tenant/buyer to buy the option. Nothing to do with financing. :)

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Hey my peeps!!! BAM!!!! Daddy's in house!!!!

So...seller concession....

Rent credits...blah blah blah...

We do not mention a rent credit in our docs..we offer a seller concession of say $3600.

the concession goes towards closing costs.

Keep in mind the seller can't contribute towards down payment.

I don't mention a "monthly rent credit" in our docs, just a seller concession of $3600.

The lender knows how to put that on the Hud-1

FHA caps it at 6% and conv. is 3%

With our numbers, we never get close to those caps.

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