Seller Concessions on a Conventional Mortgage possible to use on repairs

Austin, Texas
Private Lending & Conventional Mortgage Advice
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Seller Concessions on a Conventional Mortgage possible to use on repairs

Tyler Ferguson
Member since 2023 · 10 posts · 11 votes

Hello!

I took a course and one of the main strategies pushed is using seller concessions towards renovations of a property even when using a conventional mortgage.  He wouldn't go into details unless you paid for his 10,000$ course on how this is structured.

Does anyone have thoughts on how to do this?  My understanding is typically seller concessions can only go towards closing costs or buying down the rate.  I am thinking maybe there is an agreement structured for payment after the deal is closed?

Thanks for any input

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  • Ned CareyPro Member
    Moderator
    Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
    3y

    Sound like this is something you need to ask the lender. My guess is no and trying to get around it is probably bank fraud. 
    just because someone sells a course to promote a strategy doesn’t mean it works or is even legal 

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    3y

    @Tyler Ferguson Typical hype from gurus….exaggerating a standard strategy and hyping it as something new.

    For conventional loans, there are set maximum concessions allowed….

    Less than 10% down….3%

    10-25% down…..6%

    25% or more down…..9%

    The concession amount may also affect the Value from the appraisal, for LTV purposes….if your contract is for $200k and the seller is giving you back $10k, you're really paying $190k.

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  • David M.
    Morris County, NJ · Member since 2020 · 5k+ posts · 2k+ votes
    3y

    @Tyler Ferguson

    Don't pay for the oourse (really any course).  This really is "gimmicky..."

    Yes, a seller concession is really only supposed to go towards closing costs, not prepaids, etc.  So, you need to have closing costs.  Also, each conforming loan has their own concession limitations.  All this is really doing it increasing your loan to let you borrow some more money.  This leaves more cash in pocket effective --- bottom line..

    As mentioned, the main risk with any sellers concession is getting the property to appraise.  Granted this hasn't been much of an issue in the recent past market.  For example, say you agree on the purchase price of 100.  You want a 3% concession.  so, to keep the seller happy and stick to your agreement, the purchase price is now 103 so that the seller still nets 100.  Now, you are purchasing at 103 and getting a loan at 103 (look closely at your ltv...).  This means the property has to appraise for 103.

    Good luck.

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  • Tyler Ferguson
    OP
    Member since 2023 · 10 posts · 11 votes
    3y

    Thanks for the input!!

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  • Jay HurstBusiness Member
    Lender · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
    3y
    Quote from @Tyler Ferguson:

    Hello!

    I took a course and one of the main strategies pushed is using seller concessions towards renovations of a property even when using a conventional mortgage.  He wouldn't go into details unless you paid for his 10,000$ course on how this is structured.

    Does anyone have thoughts on how to do this?  My understanding is typically seller concessions can only go towards closing costs or buying down the rate.  I am thinking maybe there is an agreement structured for payment after the deal is closed?

    Thanks for any input


     Yeah, I have heard this pitch by someone else who took the course and paid the 10k. Here is the upshot: it does not work in realty. 

    Hurst Real Estate, INC4.991 Reviews
    WebsiteView Page
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