If you include a sellers concession of 5 percent in a sales contract is the selling price the amount before or after the concession?

Answer

If one does a seller concession, it might be wise to specify in the contract that the realtors agree to base the commission on the sales price minus the concession. I do believe that this is a poor tool to use and is often used in attempt to jack-up realtor commissions, attempt a near-form of bank fraud, and further put someone in a loan they obviously cannot realistically afford at a questionable appraised value, which is part of what caused the troubled marketplace and a large number of families to find themselves in a foreclosure situation

Answer

The exact market convention will vary by country or region.

In the US the sale price is the agreed number which is listed as the sale price. Seller concessions and other adjustments can exist and they do not change the sale price. How much the borrower brings to the table and how much the seller walks away with after the dust has settled does not change the sale price.

A lender will want to know the details or will cap the concessions in the US. If there is no lender involved the buyer and seller can agree anything they want. Even if there is a lender involved the sale price does not change. The lender makes its own decision in underwriting as to if they want to fund the deal.

US appraisers are trained to take into account the concessions when determining their estimate of value. Note that they are estimating based on other transactions. If many of the other transactions have the same concessions then the value is less likely to be adjusted compared to a sale that is not similar to all the other comparable. At the end of the day the appraiser is offering an opinion. The true value is what a buyer will pay to a seller when the buyer and seller are conducting an arm's length transaction and there are no other factors significantly influencing the price agreed (the sale price).

Mortgage fraud and other issues may be more common when there are concessions or other adjustments to the sale price. That does not mean that all seller concessions indicate mortgage fraud or that seller concessions are material to the sale price vs. value.

Market conventions change with market conditions and changing business or legal details. 15% gifted deposits were common and legal in the UK at one time. Now the market practice is to take the gifted deposit off the sale price when computing the loan amount. The sale price remains the same but the lenders have lowered what they will lend. Things change based on new ideas.

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First answer by anonymous. Last edit by Savemoney101. Contributor trust: 120 [recommend contributor]. Question popularity: 126 [recommend question]