After Opinion 710 turned the NJ real estate community upside-down, the following "clarification" was issued.
Most attorneys interpret this to mean that seller concessions are allowed as long as the purchase price increase, and related credit to the buyer, are fully disclosed to the lender and on the settlement statement.
Feel free to call me for the latest opinion on this issue.
NOTICE TO THE BAR
Clarification of Advisory Committee on Professional Ethics Opinion 710 In response to numerous inquiries concerning "seller's concessions," the Advisory Committee on Professional Ethics hereby clarifies Opinion 710, "Misrepresenting Purchase Price or Other Material Fact Regarding a Real Estate Transaction." The Opinion is based upon the particular facts submitted by the inquirer and recited in the Opinion. It addresses fictional and deceptive increases in purchase prices unrelated to the actual circumstances or costs of closing, and contrary to the expectations of the lender or the ultimate holder of the mortgage. As stated in the Opinion, a prohibited transaction is one that is not premised on "a legitimate charge against the seller on account of any actual costs assumed by it and otherwise payable by the buyer." Accordingly, the Opinion does not implicate a contract of sale that explicitly states that the seller shall provide the buyer with a credit against legal and legitimate costs or expenses related to the sale, which would otherwise be absorbed by the buyer, such as actual closing costs.
Melville D. Miller, Jr., Esq., ChairAdvisory Committee on Professional EthicsDated: December 22, 2006
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