FHA guidelines allow 1% in seller concessions but only of the buyer is getting a FHA loan. If not they will allow ZERO seller concessions.
Although there are exceptions I would never submit a short sale of any kind where the buyer needs 6%. 3% max on regular short sales. 1% on FHA. Anything else is wasting time and placing the seller closer to foreclosure.
I have. It was about 3-4 years ago but the rules haven't changed. The offer price was over the FHA Approval to Participate appraisal price and the lender netted 88%. You'll need variance and a very strong offer. I've found that you can typically get a variance on either NET or concessions over 1% but not both.
Also, I should say that I agree with Bryant and now I wouldn't take a buyer who needed 6% seriously.
If a buyer NEEDS any kind of credit, then they are not qualified to make an offer on a short sale. Period.
My experience is different. We have many FHA buyers that need 3% in closing costs. They can't compete in the REO market but make very good short sale buyers because:
This would certainly depend on the market. Mine is very heavy on FHA buyers.
Just curious, Bryant...How do you respond to lender counter offers, or seller (or any) costs not approved or covered by the lender? Who ends up paying since the buyers cannot do so on their own, and have likely no room to bump up the price. What do you do if the credit is not approved?
Hi Joseph. Just like any other real estate transaction these things are addressed in the contract.The 3% seller concession is normally just a line item credit to the buyer. I've not had a problem with this. There are costs that the lender cannot pay if it's FHA so we just put in the contract that these are paid by the buyer.
We require a pre-approval at time of offer. If it's not solid we don't accept the transaction.
I've also not had any problems with pricing until the recent FNNMA fiasco.
Getting a low down buyer up in price if needed is also rarely a problem unless the price is not reasonable. But I would have that issue with a cash buyer too.
Now having said all that I do prefer cash buyers all things being equal.
So it really just depends on the deal. There are some deals where I know I'm going to need a flexible cash buyer and some where I don't.
We also put in the contract that the buyer will pay $xx towards the seller's closing costs. I base this figure on the amount of the seller costs that I expect we will need to move to the buyer side. This will cover HOA estoppel fees or any other costs the lender make balk at including additional payments to junior liens.
Each deal is structured based on what's needed for that particular transaction.
I have FHA short sales approved with 3% seller concessions all the time - but when it comes time to review the FINAL HUD - the seller concession is cut due to "non-approved" items such as pre-paids and loan fees. Has anyone else encountered this issue? What work-arounds are there?