IPCs and Realtor Compensation
"Typical fees and/or closing costs paid by a seller in accordance with local custom, known as common & customary fees or costs, are not subject to the IPC limits..."
That little slice of verbiage, part of the Fannie Mae selling guide, offers some clarity on a point of confusion that's all to prevalent in the industry for both real estate agents and lenders considering changes to MLS-seller-advertised-Realtor-compensation changes are now here.
Realtor compensation, whether buyer or seller paid, has historically been seller paid - it is customarily paid by the seller, and in my opinion going forward based on market metrics, will continue to be paid by the seller. While it's TBD on how things will change on a micro level, on a macro level, sellers will continue to pay buyer's agents - either in the form of credits/concessions, or via lower sales prices, as buyers will likely continue to agree to pay for a total cost, including acquisition costs and agent services.
In the mortgage world, IPCs are "interested party contributions" - they've been rare the past few years as we've seen a heavy sellers market in a post-covid world in the majority of markets, but with inventory balancing out and days-on-market creeping up in a few markets, IPCs are back in play for many.
The short version of IPCs is that on various loan types, there's a limit on how much an interest party (eg the seller, real estate agent or any other 3rd party with ties to the transaction) can contribute to a buyer to help with things like closing costs.
On VA loans, the limit is 4%. FHA, 6%, conventional, it varies based on down payment and occupancy type, but ranges from 2-9%.
It's important with the pending changes to Realtor commission to understand that sellers paying for buyer real estate representation will NOT count against the above IPC limits.
There is a lot of misinformation and confusion, even within the real estate industry, about these changes and their impacts, so it's important to understand the facts in order to accurately answer consumer questions and continuing to offer a high level of service, with transparency in costs to consumers.
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