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Seller & Lender Credit Guidelines

Seller & Lender Credit Guidelines

Here are a few quick reminders/guidelines for Seller and Lender Credits.

  1. If a credit is specified to be for a repair anywhere in a purchase contract, the repairs will have to be completed PRIOR to close of escrow. We will need to show proof they are complete with either an appraiser’s or a licensed contractor’s certification.
  2. Credits for closing costs cannot exceed actual closing costs. Be sure to check with your lender to get an estimate for total closing costs. If there are significant transfer taxes and an impound account, the total closing cost figure can be substantial, creating much leeway for credits.
  3. Credits can be for non-recurring and recurring closing costs. There is no need to specify which. Credits can and should simply be for “closing costs.”
  4. Closing cost credits should be on a separate addendum, and not on a “Request for Repairs” addendum. It is well known that Realtors substitute “closing cost” credits for “repair” credits, to avoid disclosing repair issues. But, this should not be made too obvious by putting closing cost credits on a “Request for Repairs” addendum (even if the Request for Repairs addendum does not specifically note any repairs).
  5. Make sure there are no large lender-credits in place already. We have had a few transactions grind to a halt b/c the selling agent negotiated a seller-credit for closing costs without knowing that we had already given the buyer a large lender-credit. As a result, the total credits exceeded closing costs, and we had to restructure entire transactions.
  6. Need credits before we order loan documents. Many agents negotiate credits at the 11th hour when sellers are more willing to acquiesce. We, however, need to know about all credits before we order loan documents. If we learn about credits after loan documents are drawn, we have to formally re-draw loan documents. This both costs money and delays escrows.

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 01524255, NMLS# 310167