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Maximum Seller Concession for Buyer's Loan

By Glenn Roberts

Home Builder with Retired

April 29, 2011 08:48 AM

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.

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Brenda Mullen

RE/MAX Associates - San Antonio, TX

Your San Antonio TX Real Estate Agent!!

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.

Apr 29, 2011 08:54 AM

Glenn Roberts

Retired - Seattle, WA

Brenda - I always knew there were various limits but never new they fell so neatly in groups.

Apr 29, 2011 09:03 AM

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.

Apr 29, 2011 09:39 AM

Nevin Williams

Fairway Independent Mortgage Corporation - Cary, NC

Senior Mortgage Advisor

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!

Apr 29, 2011 09:49 AM

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.

Apr 29, 2011 10:17 AM

Cynthia Larsen

Cotati, CA

Independent Broker In Sonoma County, CA

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.

Apr 29, 2011 10:38 AM

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.

Apr 29, 2011 10:47 AM

Richard Iarossi

Coldwell Banker Residential Brokerage - Crofton, MD

Crofton MD Real Estate, Annapolis MD Real Estate

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

Apr 29, 2011 11:23 AM

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.

Apr 29, 2011 11:52 AM

Tammy Lankford,

Lane Realty Eatonton, GA Lake Sinclair, Milledgeville, 706-485-9668 - Eatonton, GA

Broker GA Lake Sinclair/Eatonton/Milledgeville

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.

Apr 29, 2011 02:21 PM

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.

Apr 29, 2011 03:02 PM

Charles Edwards Bentonville

Coldwell Banker Harris McHaney & Faucette 479-253-3796 - Bentonville, AR

AR REALTOR, Bentonville Real Estate Agent and Broker

Glenn, there is a lot to know for sure and buyers need us to know it...or who to call.

Apr 30, 2011 01:05 AM

Charles - One never knows when we'll have to have certain odd facts.

Apr 30, 2011 01:55 AM

Paul S. Henderson, REALTOR®, CRS

Fathom Realty Washington LLC - Tacoma, WA

South Puget Sound Washington Agent/Broker!

Glenn, this is a handy little graph that I can use daily, thank you!

May 01, 2011 08:18 AM

You're welcome, Paul. I wish I could use it daily.

May 01, 2011 08:26 AM

Brian Clinger

Coldwell Banker AJS Schmidt - Cascade, MI

Brian Clinger ABR, GRI, CRS, SRES

Great graph Glen, I have and will likely continue to rely on the lender to tell me what I can use for each buyer, however this is great info. I can now have a conversation with buyers about their options in the early stages.

Mar 25, 2014 11:43 PM

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Glenn Roberts

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