Hat tip to Carl Streicher, mortgage broker, for sending over this handy chart on allowable concessions, also known as seller contributions. This is how the buyer-agent commission can be included as a part buyer’s mortgage package, even if the seller didn’t sign the optional form with his listing.
If the buyer-agent writes the offer with a 3% or 4% seller contribution to the buyers’ closing costs, then the commission can get paid plus cover some or all of the buyers’ other closing costs too. Sellers typically want to offset with a higher price to compensate, which can make the appraisal more challenging, but once the home has been on the market for a few weeks maybe the seller will take less?
This is the reasonable solution that can solve everything.
Prior to the Frenzy, seller contributions were more common, especially with first-time homebuyers who were tight on cash. But concessions all but went away once bidding wars started breaking out everywhere. If there are multiple offers now, the ones without a request for seller concessions will probably float to the top of the pile.
Why am I skeptical?
Three reasons:
- Sellers will have already been told that they don’t have to pay for the buyer-agent.
- If there is another offer that doesn’t request a concession, then it will likely be favored.
- The seller and listing agent will want to negotiate the amount.
You would think that sellers could just focus on the amount of their net proceeds, but some get weird about paying concessions. If the listing agent is experienced/strong and wants to stand by his fellow agents, then he will explain it in a way that the sellers see the obvious benefit – it gets your house sold.
But it’s not a slam dunk. At least not yet, though a solid advertising campaign by NAR and CAR could go a long ways to making it the palatable solution for everyone in America to transact the same old way that we’ve been doing it for 100+ years.
So far, it sounds like the MLS will be allowed to have an entry for concessions that the seller is willing to pay. There will be heavy language about it being the buyer’s choice how the money is spent, and it doesn’t automatically go towards the buyer-agent commission.
They have added two boxes to our current listings on the MLS; Seller Consider Concessions (yes or no) and Concessions in Price where the listing agent can include the dollar amount or percentage that the sellers are willing to pay.
You’d think all agents would rally together and use these boxes just out of self-preservation. But they are already offering low or no commissions now before the new rule has taken effect. If the majority use the concession boxes regularly, maybe it will become commonplace.