How, exactly, are these credits defined? Are they literally allowing sellers/lenders to credit buyers for 6%? How long has this been going on, and how is it reflected in the price?[/quote]
They are defined in the purchase contract.
It is reflected in the price like the examples in my above link. The purchase price $345,000 is what you would see in the public records. So the lender gives the money to the seller who allows the buyer to be credited various costs (origination, closing cost, buydown rate, etc) and so the seller nets less. The 6% can’t go for just anything (like cash in pocket or a new TV) but there is a wide range of things it can be used for.
As long as its disclosed up front to all parties it is perfectly legal.
Edit: I just talked to someone with Sandicor access. Concessions seemed to be better accounted for in SD than up here in my local area (Ventura County and San Fernando Valley). I will see if i can get a download and run some stats.
Edit2: I would also like to note that another important takeaway is for buyers to realize that even if they hear that a higher offer is in it doesn’t mean its a better offer than what you put in. Trying to compete against unrealistic offers that have no chance of closing is a sure way to overpay.
