I’m not getting involved in debates about the merits of the realty agent commission system. For me it comes down to the one thing – are the facts about the sales transaction being fully disclosed to the lender during the loan application process? If so then everything’s cool; if not then there’s a problem and it doesn’t matter how many people have gotten over, it still isn’t right.
On every appraisal report there are questions asked of appraisers that require very specific answers. Here are but a couple of them:
“Is there any financial assistance (loan charges, sale concessions, gift or downpayment assistance, etc) paid by any party on behalf of the borrower”, followed by yes/no checkboxes. Then “If yes, report the total dollar amount and describe the items to be paid.”
This $5,000 cash rebate would definitely fall under the category of being reportable; and yes, if it isn’t reported to the lender it is a form of mortgage fraud. You’re welcome to ask around and see if I’m making this up.
Now the sale price is the sale price, and the appraisal should reflect the market value of the property regardless of the details of the transaction. However, if there are sales concessions or any reduction to the price actually being paid by the borrower the appraisal reports are required to both show them and reconcile them in the appraisal; and the lender is supposed to make their loan decisions from there. Most lenders will not make their loan based on the (let’s say) $600k sale price in this type of situation, but will back it down by the $5,000 that the borrower is not paying for the home. In other words, it’s not how much the seller nets that the lenders make their decision on, but how much the borrower is actually paying in terms of cash equivalency.
Negotiation of how much to pay a realty agent is a completely different subject, one which I have no strong feelings about one way or the other.
