I represent a buyer using VA loan.  Short sale seller has FHA loan, but list agent says only 1% allowed for my buyer's closing costs.  I thought this only pertained to a buyer using FHA loan, but my guy is using VA.

I ask because without first submitting our offer to the seller's lender, he wants to my buyer to agree to 1% right up front and I would have at least submitted the pre-HUD and offer to at least see if the seller's lender would accept (wrong or right?).  Also, I thought a variance could be requested asking to seller's lender to pay for 3% of buyer's closing costs either way.

I know final investor approval could change things and although my client would accept 0%-1% in closing cost assistance from the seller's lender (since he's using a VA loan), I found it odd for the agent to "counter" our offer with 1% instead of 3% without first submitting.

Your thoughts and replies are always appreciated!

Frank

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I typically get 3% towards buyer's closing costs approved, and the buyer's loan type doesn't matter.  The PFS Mortgagee Letter states only 1% IF buyer is getting an FHA loan, but HUD approves those exceptions all the time.  As long as you are netting the required minimum, 88%, 86%, 84% based on time during he PFS period.  The servicer will need to initiate a HUD variance which almost always gets approved...again, as long as you are netting the required minimum.  Also, some servicers will require the buyer provide their good faith estimate and the preliminary HUD1 include their closing costs since assistance is requested. 

When the Buyer is obtaining an FHA Loan 1% of the mortgage amount is the most the Lender or Servicer has delegated authority to approve without the permission of the FHA.

The agent is doing his job by countering your offer before submittal.  A variance can take a couple extra weeks, and by keeping your closing cost request to the advertised amount, he is keeping the approval time frame as short as possible.

Too many people think that we agents should just submit the first thing that comes along and let the bank make the decision.  No.  The Seller and his or her agent should do their best job to get the best offer possible in front of the lender first.

The servicing bank only has delegated authority to accept 1% closing cost subsidy, but they can generally get 3% on request to HUD, subject to the required minimum net of all costs.  When submitting the agreed contract, make it clear that buyer can't make it work without the 3%.

Following the rules on these FHA-HUD sales makes life much simpler.

It is 1% using another FHA loan and 0% for anything else, that would be VA in your case.

Sure it may well get approved with a variance but it may not and time goes by and the clock keeps ticking.

Another buyer may be a better candidate. If your buyer knows the terms and wants the property and can buy the property under those short sale terms.......

Not odd at all- the listing agent knows the rules.

FHA allows 1% of the Buyer's Mortgage Loan amount for FHA buyers only. I have had buyers get 1% of the sale price (usually a very small difference) and you can request a variance for more than 1%, but it will delay the approval at best and it is possible HUD will deny. I just had one such situation with BofA and it was such a hassle that after months of nothing and multiple escalations we found a way to make the deal work at the 1% (i.e. the way I wanted it structured from the beginning). Rather than fight the 1% guideline, just have the Seller pay the title insurance and title closing fees. They are allowable costs and usually make up 1-2% right there.

It sounds like the listing agent is on the ball and trying to protect his seller by obtaining the offer that is the easiest for HUD to approve. That would be an offer with a limit of 1% toward closing costs.

Does this mean that HUD will never authorize more? No, it does not, and I've done FHA short sales in which I've obtained variations and the buyer was allowed to receive 3% of the sales price as a credit toward recurring and non-recurring closing costs. But that's the exception and not the norm, and in a seller's market, I would advise a seller not to accept an offer that contained concessions if we had other offers without concessions.

Obviously, because you represent the buyer, you want the seller to take your offer and go the extra steps to get a variance.

However, the listing agent represents the seller and might not care about your buyer, especially when there is most likely another buyer right around the corner.

As much as possible, I try to avoid seller concessions in short sales and REOs as they tend to lengthen the approval time but you should be able to to get up to 3% on a short sale. The seller's loan type is not the issue, it's what the buyer's lender will allow and what the lien holder or investor will approve. Your listing agent may have inside info in this case as to the amount of seller concessions the lien holder or investor will approve.

I am seeing listing agents offering less on closing cost to offset,The sellers HOA or taxes . Little they forget when we get the short sale approval letter the bank has the closing cost incentive reflected on letter. I always insist they ask for 3 %closing cost .I tell them, let the bank reject it,

I just got a variance for 3%.  They will allow CCC that are higher if the offer is HIGHER than the ATP price.  Then you need to ask your negotiator for a variance.

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