Ok, I have someone who wants to start looking at houses. From the door, I tell him theres no sense in looking or projecting until him and his wife get pre-approved. I tell him he can use whatever mortgage co. he wants or I could have this mortgage guy call him. So, mortgage guy calls him, gets info, then I get pre-approval letter. 100% financing low/or no down payment, and they want to get sellers assist.

My question is, how does this work?

Maybe I shouldnt assume, but I am guessing that every seller isnt going to do seller assist, correct?

For example, lets say someone is pre-approved for 190k, but really only want to spend 175-185. that's fine. But how do we make an offer? For a seller to provide sellers assist, does the offer need to be almost dead on asking price? And what would be a good amount of sellers assist for the 200-180k range?

Oh, and they want to put no down payment on the home. How do I do that? Doesnt the offer need to contain earnest money deposit?

The mechanics of this stuff confuses me. I have no experience with it. Once I do it a few times, I am sure I will learn the ropes quick.

I am going to try to meet with a mentor tomorrow to discuss some of this stuff. But any help, examples, or guidance would be very helpful.

Thanks in advance.

Call your mortgage guy and ask him to tell you what he told your buyers.

Sellers are usually most concerned about how much money they take to the bank after closing; not whatever they're paying for someone. Structure your offer geared towards that end.

I don't quite get it...if it's 100% financing then where does the seller assist come in? Is it that they were only approved for $190 but may want to make a $200 offer?

Or do you mean a cash back at close to help with closing costs?

To pay the closing costs.

Yes, to help with closing costs.
Now is that how it works out, they get cash back, and they just use that for closing costs?

You don't give them cash back, you give a credit to them at closing either from the sale price or your commission.

Personally I like option 1., the sale price.

OK, if I gave them a credit from my commission, I wouldnt make any money. lol

You would build the closing cost in to the purchase price. The buyer receives no cash back.
This would be the 100% financing. and Sellers bottom line is not effected.

ah ok...here we call that seller concession. Seller assist sounded more like seller financing so I was confused

yes, we just build it into the sale price. So if the Buyer only wanted to pay $200,000 for the property his top offer would be for $203,000 (asking for $3000 back at close). He doesn't get it back in cash (sorry I worded that incorrectly )but that $3000 gets deducted from buyer costs on the HUD.

If its 100% financing, then the deposit would also get deducted from their closing costs.

Hope that makes sense!

I talked to my team leader today and he told me we will figure it out. He wants to sit down and do an example of the buyer's closing cost so I can show the buyers what to expect. He says we will have to figure everything out long form with the mortgages because there will be a piggy back mortgage of 80/20 and there's only one mortgage field in our MLS where we computer est. closing costs. Our new MLS system will be out soon, so I am wondering if it will accomodate 2 loans instead of just one.

In our MLS it is listed as Seller Concession, but I have never heard anyone use that term. They always say sellers assist.

Sounds to me that your buyers don't have any money. While buyers don't really need money to buy a house if they have good enough credit, the loan and purchase contract have to be structured properly to accomplish the $0 down plan.

From what you describe above it sounds like your mortgage guy wants to simply have the seller credit your buyer some money at closing to pay for closing costs (taxes, title ect) IF your buyer doesn't have any money to bring to closing make sure the seller's credit is enough to cover everything. One thing that could get you in the loan process is if the appraisal doesn't support the inflated purchase price (ie 203K instead of 200K) if this is the case it's not the end of the world but your going to have to restructure the deal. You have 4 options at this point, Have the buyer come up with more cash, have the seller lower their price, Have the mortgage broker up their interest rate and have him use some of his rebate to pay closing costs, or the worst use some of the sales commission to pay part of their closing costs,

In the end remember most lenders will only allow 3% in seller concessions on a 100% deal, very few will allow 6%, and the buyer MAY still have to come up with prepaids.


ps. if they're spliting it up into an 80/20 there are second mortgage programs that have no closing costs if needed
If you need any help or advice shoot me over an e-mail. Gregt@emsf.cc

Ask the mortgage guy to increase the rate and kick in up to 2%-3% of the resulting yield spread premium. We charge a flat fee of $1,495 on loans and many cases increase the rate and give the resulting YSP to the customer for closing costs. It is not the sellers problem that the buyer doesn't have closing costs

Thanks
Danny

The way to work this is very simple and if you do it the way I'm going to explain will almost never fail. First your buyer puts an offer on the house (a lowball offer). Then the seller counters or you guys end up coming with an agreed upon price. Then you say OK we'll agree to that price but we also want a 6% seller's concession (or whatever amount). They will agree almost every time since it's no money out of their pocket and everything was agreed on in advance.

Example is house was listed at $200,000, you offer $150,000. Everyone hates you because of the ridiculously low offer. They counter with $190,000. You say okay to the $190,000 or counter again. Price is agreed upon, then you say okay we'll do it but need a 6% seller's concession. The agree upon price is $190,000 and in the contract you write $201,400 is the purchase price and add a note there is a 6% seller's concession.

The only reason I'm using 6% as an example is because that's pretty much the standard allowed by most mortgages. The seller might even end up with some money back at closing for repairs.

With this scenario everyone is happy. Your buyer got a great deal and the seller got what he wanted.

Another way of doing this is not writing anything in the contract. The way it's done is write out the contract at the agreed upon $190,000 and during the attorney review period have the attorney negotiate the seller's concession. Sometimes the seller gets mad and doesn't want to do it, but the bottom line is as long as you don't affect their bottom line they'll usually go for it. Worse case scenario the seller doesn't agree, you have the attorney kill the deal and you move on to a more receptive seller. If everything works out, the attorney makes an addendum to the contract with the seller's concession included.

With the way the market is right now, I've only had a problem once on a seller's concession and it was because a real estate agent was the owner of the house, but at the end we negotiated it to the numbers necessary for the deal to work out.

Well, we put an offer in and here is what happened.

Asking Price: $169,500
Offer Price: $174,500 but max. of 6% return to pay for buyer's closing costs. $1,000 Earnest money
Listing agent calls and say that the seller flat out rejected it. Not even a counter offer.
The seller would have gotten approx. $165k
House was only on the market for 2 days.
Agent says that the seller thinks he is going to wait for a better offer since it has only been on the market for 2 days. Homes arent flying off the shelf in this area; not that desireable. Agent asks if he can call me down the line to see if my buyer's are still looking.
*Seller motivated. Immediate possession.*
I hope your home sits like the others in that price range for 6 months.