How do They get away with it? Sellers paying the down payment??????

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Real Estate Agent with Berkshire Hathaway Home Services PenFed Realty 0225102565

 How are these programs able to do this, exactly? Americare, Nehemiah, I am sure there are others. Seller pays a 3% donation to the program and the program in turn gives that same 3% back to the seller in the form of a  down payment for the purchaser.

It's legal, but how are they doing it, legally? I know there is talk about ending these types of programs and apparently they have been around for some time, but we are starting to see a lot of them with the loans getting so much harder to get.

Just curious if anyone knows a lot about this and would like to educate me on the subject.

Here is the link if you would like to read more about the Nehemiah Program and how it might be able to help your buyers.

 

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Rainmaker
341,671
Eric Reid
Renaissance Realty Group of Keller Williams Atlanta Partners - Lawrenceville, GA
look at the new FHA rules  the seller can give back 3% in closing and 3 % in closing costs. It is legal as long as it is disclosed to all parties ( read lender) it may not be smart home buying but not illegal
Feb 29, 2008 01:25 PM #1
Rainer
1,116
Lisa David
Keller Williams, KW Commercial - Atlanta, GA

The Nehemiah down payment assistance is for FHA loans.  It is an asistance program that allows the seller to contribute the 3% down payment as down payment assistance or seller's concession.  Normally in a transaction if the listed price is 200K the offer amount may be 206K+. (which is the listed price plus the additional 3%and the service fee ...approx .$500.00 so that the seller will receive their full asking price for participating in the program.  However, the buyer can always offer lower but to make the offer attractive they will offer more because the seller will receive their asking price. 

This program may soon be obsolete later in March.

Feb 29, 2008 01:33 PM #2
Rainmaker
367,714
Mike Russell
Mike Russell & Associates - Overland Park, KS
Overland Park Kansas Real Estate
legal loan sharking is what I call it. Send $5000 to the title company this morning, get $5000 plus $500 fee back in the afternoon. Whatever it takes to get the deal done,
Feb 29, 2008 01:36 PM #3
Rainer
39,301
Sally Zatkoff
Berkshire Hathaway Home Services PenFed Realty - Fairfax, VA
Making a Difference
Oh, yeah I forgot about the $500.00 fee on top of it. My buyer is putting in an offer for 19K below asking and is using the Nehemiah program. Great for him if he can get it, but when I first heard about this program I thought what Michael thinks. Don't see it staying around too much longer, but if get buyers buying maybe it should stay around
Feb 29, 2008 01:44 PM #4
Ambassador
896,190
Larry Bettag
Cherry Creek Mortgage Illinois Residential Mortgage License LMB #0005759 Cherry Creek Mortgage NMLS #: 3001 - Saint Charles, IL
Vice-President of National Production

FHA modernization is trying to make the downpayment only 1.5% or zero %.  Either way, they want to rid seller downpayment assistance.

Feb 29, 2008 02:15 PM #5
Rainer
136,537
Gayle Balaban
The Best Spot Realty/Waterfront Real Estate/Ooltewah Real E - Chattanooga, TN
E. TN Waterfront Real Estate
The sellers often don't understand it.  Essentially it is a price reduction no matter how you cut it
Feb 29, 2008 02:23 PM #6
Ambassador
448,173
Deb Brooks
Brooks Prime Properties Wichita Falls Texas - Wichita Falls, TX
Dear Sally, this is the kind of behaviour that got our industry in to trouble in the first place. It's like a fake algebra question. Fill in the blank and make it work. Later in the rain~Deb
Feb 29, 2008 02:39 PM #7
Rainer
39,301
Sally Zatkoff
Berkshire Hathaway Home Services PenFed Realty - Fairfax, VA
Making a Difference

Gayle I think the sellers understand it alright. They see the numbers and they understand just fine.They are just taking the sale however they can get it if they have to sell they have to sell and they are scared. Not everyone pays the extra 3% to make up the difference of the down-payment. Like my guy 19K under and asking another 6% subsidy plus the 500 fee. Those numbers don't cover anything up

 

Deb- I agree with you. This and the buyers that are not jumping on the 5.3% interest rates when they can "because they may come down even more" (Greed)

Larry  It will be interesting to see what happens with this seller assistance.

Feb 29, 2008 11:34 PM #8
Rainer
39,301
Sally Zatkoff
Berkshire Hathaway Home Services PenFed Realty - Fairfax, VA
Making a Difference
Andrew    It is not seller financing. It is just the seller giving 6% or more towards the purchaser's purchase and 3% of that goes towards the downpayment, but it goes through the Nehemiah program as opposed to coming directly from the seller. Seller donates to Nehemiah---Nehemiah donates to purchaser
Mar 01, 2008 12:22 AM #9
Rainer
41,853
Eugene Jones
Weichert Realtors - Somerville, NJ
Basically, for anyone getting an FHA loan, FHA says that a borrower can receive gift monies to cover down-payment, closing costs, etc. This money can come from a family or a non-profit organization. That's where Nehemiah comes in. Nehemiah will gift to a buyer up to 6% of the final contract's sales price, but first the seller would have to agree to donate to Nehemiah that same amount plus a processing fee. So lets say someone is purchasing a home for $150,000, and has to put down 3%, which is $4,500. Nehemiah will give the $4,500 to the buyer as a gift, as long as the seller agrees to donate that $4,500 plus the processing fee back into the organization. The seller will receive his $4,500 back from buyer as down-payment, and the buyer doesn't have to come out of pocket for the down-payment. The only monies spent is the processing fees paid by the seller to Nehemiah. As long as everyone understands the situation, it sounds like it could be a win-win deal.
Mar 01, 2008 01:01 AM #10
Rainer
41,853
Eugene Jones
Weichert Realtors - Somerville, NJ
Just to add, I believe the problem occurs when the price is raised just to cover the costs. Instead of it being $150,000, the buyer will offer, lets say 155,000, in some cases much more. In that way, the sellers receives his full price for the home, but now the numbers can be a bit tainted if the home isn't really worth that extra added amount. 
Mar 01, 2008 01:17 AM #11
Rainmaker
186,230
Cameron Wilson
Labrum Real Estate - Murrieta, CA
The Short Guy - Murrieta,Temecula,Menifee Californ
Just closed my first Nehemiah deal yesterday and believe it or not it was on a REO property. My buyers offered full price and the bank paid 3% closing costs for the buyer and 3% plus $499 to Nehemiah and they in turn gifted 3% to buyer for the down keeping the $499 for themselves. Sounded crazy to me when I first heard about it. Didn't even know how to spell Nehemiah before this deal.
Mar 01, 2008 08:47 AM #12
Rainmaker
2,191,320
Elizabeth Weintraub Sacramento Realtor Top 1%
RE/MAX Gold - Sacramento, CA
Put 40 years of experience to work for you

And just today, the justice department oveturned a former ruling and now says Nehemiah programs are legal. Just goes to show ya. If I were a buyer, would I do it? Probably not. Who wants to over encumber a property? But many buyers and sellers are doing it. And it's legal. For now.

There's no difference between settling on a $100,000 price and later saying, whoops, we meant to sell at $105,000, and we'll give $5K back to the buyer. Nothing at all.


Mar 05, 2008 02:44 PM #13
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Sally Zatkoff

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