What is the maximum Seller Concession for a Buyer's Loan?

Well, that depends, and it's always best to consult with the Buyer's lender before your offer includes promises your lender can't keep. When you are negotiating for a buyer, keep the following in mind.

Type of Loan	LTC/CLTV	Maximum Seller Concession Allowed
Conventional Primary and 2nd Homes	Over 90%	3%
Conventional Primary and 2nd Homes	75-89.99%	6%
Conventional Primary and 2nd Homes	Under 75%	9%
Conventional Non-Owner Occupied	N/A	2%
FHA	N/A	6%
VA	N/A	4% Maximum for prepaid closing costs, funding fee & debt payoff

This information provided by Eileen Burke with Cobalt Mortgage in Seattle, a preferred lender.

Eileen also counsels that Seller concessions can not be paid in cash to the buyer, so if you are leaving money on the table, apply it to future home owner's insurance, property taxes, or *HOA dues.

We are in a very unusual market. For listings where the Sellers properly prepare the home and agree to list at a price the market recognizes as current, we are seeing very short market times and multiple offers. The other half of the market consists of homes that were priced too high originally and/or the Sellers are unwilling to lower them. It's this homes that the seller is often willing to assist the buyer in making the loan more attractive and sometimes just possible.

Representing a Buyer involves getting the best deal possible and this is one avenue to explore.

Representing a Seller and suggesting a Seller contribution in a counter offer may just be the ingredient that makes for a happy transaction.

Previously published on Active Rain

Clutch, a book by Paul Sullivan is all about the ability to do under pressure what you can do under normal circumstances. The concept applies constantly in sports events as athletes who have practiced for years suddenly need to excel in real time under "other" circumstances. Those in the military discover who can and who can't perform in combat sometimes with dire consequences. 

How does "being a clutch player" pertain to real estate? What traits do clutch players have and how do you recognize them as you decide which Realtor to use when buying or selling a Seattle home or small business?

The five traits are focus, discipline, adaptability, being present, and the awareness of the push and pull of fear and desire. Without all five character traits, will your selected agent stumble through the preparation, searching, marketing, negotiating, inspecting, and closing steps involved in the typical transaction in the very different market we now face?

The well-developed ability to focus, to concentrate like a laser, on the client's needs is the first and most important of the five traits.  Solid discipline keeps the Realtor on track. Adaptability allows your agent to recognize trends and keep you advised to slight as well as major changes in the market. Being present involves meeting the market where it is today. Past successes are nothing but ego strokes for the agent. Today's market is substantially different from anything seen over the past 30 years. And lastly, is your agent keyed into your desires, and is he aware of the consequences of failure? Are you?

Overconfidence and pride are enemies of a clutch player. If anyone tells you that making a move and successfully completing a transaction in the current market is going to be easy, they are missing or ignoring many important factors that they cannot control. Loans and appraisals are very uncertain elements these days. Buyers remorse is frequent. Sellers okay at one price may be coming up short at the offered price.

Choose a Realtor® wisely. Choose a Lake and Company agent to help you find success in real estate.

Not one real estate agent in the country has ever admitted publicly to being a poor negotiator. We all claim to be experts. And most of those claims are based on agent experience developed between 2002 and 2007. Everything sold, no matter what. Boasts like, "I averaged 12% over listing price for my sellers," abound. Buyer agents claim that, "I got it for my buyers over 8 other offers," were pretty much the norm. But I don't think that this had anything to do with negotiating skills. A pleasant, professional appearance, a pre-inspection and a strong offer usually carried the day.

Let's take a rational look at negotiations to understand the process see if real estate agents are even in the game these days. There are two ways to negotiate. You can negotiate from a position or you can negotiate from merit. If, as buyer, you want to negotiate from a position you are essentially saying that you won't go over $xxx,xxx for that house. Your reasoning might be comps or condition. But you take a stand and see if the seller rolls over. If your agent has to deliver that message, or a message that contains the clause "only if," then you are in a fixed position and decrease your chances of making a deal. The message is, the buyer doesn't really care about the house; only care about getting a deal. The same rationale applies to sellers. On the other hand, if the offer has merit, if it explains your needs, your financial abilities, and if it assesses the situation rationally, then it's worth trying to find a way to understand the merit of the other party and determine if the needs of each can be attained.

Once you've established how you and the other members of the negotiation are looking at the situation, you will need to determine the style of each person who has something to say. The five basic negotiation styles consist of defeatism, accommodation, compromise, withdrawal and collaboration. Non of these styles is necessarily wrong, and it is important for an expert negotiator to recognize how these various styles are being used an any conversation.
Someone who uses the defeatism style is often perceived of as aggressive and as a bully. It is often used successfully when that negotiator discovers a weakness in the other party and tries to use it to their advantage. If such a person has a habit of using the technique, at some point they may make an error in evaluating the weakness of others and destroy the negotiation progress.
 If, at the beginning of a negotiation, one party adopts an accommodating posture, the others may see that as a weakness. This type of person, a person who doesn't want to make waves, would be wise to have a skilled negotiator on his side to help him keep his original objective in mind.

Some negotiators are compromisers. It often works well for each party to to give up something in exchange for something else. In some cases this can get confusing and again, one or both parties may loose sight of their original objectives.

For offers that are too low to start with, or counter offers that don't seek resolution other than in price, and usually the original price, some parties to a negotiation will just withdraw. Nothing stops a discussion faster than one party refusing to speak to the others. The final style of negotiating is for the parties to collaborate. It stakes a skilled negotiator to sincerely ask and discover what the opposing party really wants, and yet be confident enough to disclose the prime objectives and goals on his side. The result, when successful, will have one negotiator finding ways to teach the other to collaborate so that both parties reach their objectives.

My next post will deal with the emotional side of negotiations. When choosing a broker to work with, it is important for you to determine how he interacts with you. It may be a good indication of how he will represent your interests in the purchase or sale of a property.

Newspapers and television keep talking about the housing recovery. Hello? The housing industry has recovered. If you've ever had a serious disease, major surgery, or been significantly injured in an accident, you long for recovery. You endure physical therapy, medication, and rehabilitation processes to, one day, get back to being your old self. But then one day you are old, and you've always been yourself, but you know that where you are now is not the recovery you hoped for. The housing market went through a period of drug induced euphoria between 2002 and 2007. Place the credit or blame where ever you want. I call it financing on crack. Investors wanted to make big money fast. Wall Street was doing anything to get bundles of loans they could then sell to investors. Lenders were going to 70% ratios (the norm always was, and is again 30%) on stated income (not anymore) just to make loans because Wall Street was buying. And the American public just had to buy a bigger and better home because next week it would be worth 50% or 80% or 100% more and we would have money to spend, spend, spend. Granted: Not everyone thought his way. But in retrospect, it should be obvious to all that the values reached in the real estate industry were not sustainable. They were not true values. In Seattle we have drifted back to the prices of 2005, and we linger at this point. That seems like a good thing to me. Prices on well kept homes are inching up. Prices on fixers are still trickling down. Why down? Because there is little upside for most DIYers in this market. The "it's fast money, honey" days are over for now. Look at any graph and you will see that we are in a stable market. For example the second and third graphs on the SeattleBubble Website show the decline percentage from the peak in many areas of the country has stopped. In Seattle, the price of homes sold over the past 36 months has changed only 3%, while in the 20 months before that it fell 23%. Lenders are being extra cautious to only make loans to people who can

• Pay them back
• Avoid default in the event of unexpected expenses
• Demonstrate financial stability

This is the market. The recovery is here and we are living it. Throw away that crack pipe, you're not addicted any more. Buying a home is not for everyone. Only do so if you want to, and if you are able to. You don't need to wait for verification from all of your friends. You don't need to wait for the newspaper to tell you that it is okay. You only need to see value, and move forward.

Also published on Seattle Real Estate with Glenn and Marjie

Realtor Magazine just published a story on cost vs. value in a sale for 5 different home improvement projects. Interesting in some ways but hard to apply. These are averages from input by realtors from 80 cities across the USA. Markets are different in each area. What the basic inventory is, make a difference. For example, in Seattle we have a mix of homes from the teens through the nineties and a smattering of townhouses built in the last 15 years. And just 20 miles away you can find communities that were second growth forest until the 1980's and other areas that were developed in the 60's and 70's.
A kitchen remodel in a 1927 Tudor is a whole lot different that a redo of a 1980's northwest contemporary. But anyway, here is the table comparing the 5 projects, their costs and value.

Project	Cost	Resale Value	Recouped
Entry Door	$1,218	$1,243	102.1%
Garage Door	$1,291	$1,083	83.9%
New Siding	$13,382	$10,707	80.0%
Kitchen Remodel	$21,685	$15,790	72.8%
Deck Addition	$10,973	$7,986	72.8%

Before you rush out and do something, do some more reading, go to a few open houses and above all, talk to your favorite Realtor®. You might even want to take him to lunch and pick his brain. If you are going to sell, you want to do the things that make the most sense for your home, in your market, under current conditions. And the best way to insure that is to get the opinion of someone working in the trenches every day.

If your Realtor® is still in the business after the last three years, then he knows what he is doing.

The realtor magazine article: Cost vs. Value.

I got an email from a buyer a while back. I had met him at an open house I was holding. It wasn't my listing and he acted like he knew more about the listing than I did. Maybe so. There is a lot of information out there. I asked if he wanted to look at some comparable properties. He said maybe.

I got an email from him a few days later. "How would you negotiate for me?" he asked. I could tell from talking to him at the open that he had read about the bubble and then the shadow inventory, and he was sure prices were going down more. He told me about how much less than asking other homes were selling for. So I pretty much guess that more than anything, he wanted the deal of the century.

I wrote back: There are two ways to negotiate. you can negotiate from a position or you can negotiate from merit. If you want to negotiate from a position you are essentially saying that you won't go over $xxx,xxx for that house. Your reasoning might be comps or condition. But you take a stand and see if the seller rolls over. That would tell me that you don't really care about the house, you only care about getting a deal. On the other hand, if the house has merit, if it meets your needs, if you can afford it, if there isn't any other property that meets your needs as well, for the same price, then it's worth trying to find a way to make the purchase work so that the seller's needs are met as well.

He wrote back: No, I want to know how you will make the seller sell at a lower price.

I knew the seller had received an offer at a lower price and it didn't work out. It might now and I would help the buyer with it, but it had to make sense.

I wrote back: It sounds to me like you are trying to defeat the seller. That is one style of negotiating. It will work if the seller and his agent are both accommodaters. They may just roll over, and give you the house for what ever you want. But they didn't to the last person. If both the seller and you were compromisers, we might reach agreement, but you would have to give up some of your desired features. I really don't know what they are other than a lower price than the home is currently listed for. On the other hand, with an offer too low, as you suggested you might make, the seller might just withdraw. We would go no where with this if the other party will no longer speak to us. I suggest we try to collaborate with the listing agent and the seller. We'll need to negotiate more after the inspection and possibly after the appraisal. Some how we can tweak their needs with ours, once I know what yours are. I need to know why you want this house so I can build a case for you. Or maybe, there is a better house somewhere else that will work as well.

Apparently this buyer, a buyer who wouldn't sign a buyer's agency agreement, a buyer who didn't seem to have needs other than to get a house for way less than the listing price, a buyer who is perhaps, not a buyer at all, didn't like my idea that we try to work with a plan that would accomplish the goal of closing a sale. He seemed to want a negotiator who would help him make it fail. I didn't hear from him again, nor did I pursue him as a client. I don't think he really wanted to be a homeowner. I think he only wanted a deal.

Fortunately, Seattle has not experienced the high number of short sales and foreclosures that the southern tier of states has. But if you know someone who is on the edge, here is some good information. These tables will tell you what the waiting period is, before you will once again be eligible for a Fannie Mae or Freddy Mac loan.

I'm not an attorney and this is not legal advice. Before you take one of these options be sure to consult with an attorney and probably an accountant. There is a lot more than a waiting period involved with these actions.

 

ACTION	WAITING PERIOD
Bankruptcy (Chapter 7 or 11)	4 years from discharge or dismissal date
Chapter 13 Bankruptcy	2 years from discharge date or 4 years from discharge date
Exceptions for Extenuating Circumstances - all bankruptcy actions	2 years from discharge or dismissal date. No exceptions permitted to the 2 year time period after a Chapter 13 discharge
Multiple Bankruptcy filings	5 years from most recent discharge or dismissal date for borrowers with more than one bankruptcy filing within the past 7 years
Exceptions for Extenuating Circumstances - Multiple Bankruptcy filings	3 years from most recent discharge or dismissal. Note: the most recent bankruptcy filing must have been the result of extenuating circumstances.
Foreclosure	5 years from completion date Additional criteria apply after 5 years, up to 7 years following the completion date: minimum 10% down payment Minimum 680 FICO score Owner Occupied Purchase or rate/term refinance only
Exceptions for Extenuating Circumstances - foreclosure	3 years from completion date Additional criteria apply after 5 years, up to 7 years following the completion date: Minimum 10% down payment Owner Occupied Purchase or Rate/Term refinance only
Deed-in-Lieu of Foreclosure	2 years from date of completion, Max LTV 80% 4 years from date of completion, Max LTV 90% 7 years from completion, follow standard LTV chart
Exceptions for Extenuating Circumstances - Deed-in-Lieu of foreclosure	2 years from completion date, Max LTV 90%
Short Sale (Pre-foreclosure sale)	2 years from completion date and Max LTV 80% 4 years from completion date and Max LTV 90% 7 years from completion, follow standard LTV chart
Exceptions for extenuatiing circumstances - Short Sale	2 years from completion date and Max LTV 90%

This table is only a guide. Fannie Mae and Freddy Mac are constantly changing their guidelines. You're welcome to call Lake and Company and talk to one of our agents anytime, but always remember that before you decide on one of the above scenarios, talk to an attorney.

In 1990, King County, Washington realizing that the ever-burgeoning population would need a larger more efficient sewage treatment system instituted a Sewer Capacity Charge for all new construction.

As Realtors, we get a lot of questions about the charge and who is supposed to pay for it. The reason  the charge was put only on new homes was because it was the new growth in the county that caused the need for the larger sewer system.  A case of government and good sense going hand in hand.

   

A home owner could pay the fee at one time, or have it amortized over fifteen years and have the amount added to their normal sewer bill.  Because it was a part of the monthly bill it was often forgotten as a separate charge. Sellers of homes built since 1990 often did not disclose that there was this extra charge attached to the property. A few years ago the NWMLS Forms Committee added a clause to the Purchase and Sale Agreement specifying that:

Charges and Assessments Due After Closing would either be assumed by the buyer , or would be prepaid in full by the seller at closing.

That calls attention to the Sewer Capacity Charge, as it is an assessment that is due after closing and escrow companies will handle the matter according to the choice of the parties to the agreement.

Ask your Realtor to research the sewer capacity charge on a property you might be interested in if it is less than 15 years old. Getting the seller to pay for it may save you a few thousand dollars.  The charge is $49.07 per month if paid over the 15 year term.  There is a discount if you can pay the Sewer Capacity Charge off early.  There is an online method to do so. Just follow the link above.

If you have any other questions any Lake and Company agent will be happy to help you. Just give one of us a call.

At the last Lake and Company office meeting, Ken Steiner of Home Street Bank was the guest speaker and delivered a terrific summary of the 203K loan program and the new Streamlined 203K program.

The Streamlined version is limited to cosmetic repairs and up to $35,000 worth of work. The standard version of the 203K plan covers foundation and structural work as well.

The major benefit of this type of loan is that the seller has no work order worries, and the buyer will have no after purchase expenses. Any work that needs to be done will be paid for by the proceeds from the buyer's loan, so long as the end product appraised value equals or exceeds the loan amount. The work is all done after closing. The buyer is then in possession.

So, you didn't want to buy a fixer, but the location of one is perfect for you. Go the 203K route. Or maybe you want a fixer. Contact a Lake and Company agent for further information. There are a lot of details but with our help and the help of a professional like Ken Steiner, you will find the process easy and rewarding.