Last week I closed a Freddie Mac HAFA deal that violated the 8% transaction cost cap.  Did it by brute force attack on Freddie Mac and the servicer, and was lucky to succeed.  I was told that this is the first time they've made this exception, and that they're not likely to make it again.

This has implications for all Freddie Mac short sales in Illinois.   Why?  because Freddie Mac considers ad valorem real estate taxes as a 'Transaction Cost'.  So here's an example of how my deal looked:

Purchase Price:  $180,000 =Transaction cost cap:  $14,400

"transaction costs":

Realtor Comm (6%)  10,800

Real estate Tax Credit:  6,690

Title Related Charges:  1832

Transfer Tax:     270

Assessment Letter:  150

Legal Fees (discounted) 2,000

__________________________

Total 'Transaction Costs'  21,742

So we busted the cap by $7,342.  Most of that was the real estate tax of $6690.

Unfortunately, moving the purchase price does not help with meeting the cap, since it's always a percentage of the purchase price.

This has become a little sticky (the same way FHA PFS % nets are), so I'm working out a way to have my listing agents address this with potential buyers, likely to include a reduction in offer price and a corresponding offset for tax credits (that's a gross oversimplification of what needs to happen, but you get the idea).

Anyway, if you have particular questions about how that will play out on your deal, more than happy to chat with you individually off line-