Change Date

September 15, 2004, Change 4

This section has been changed to create subsection lettering.

a. Definition

For purposes of this topic, a seller concession is anything of value added to the transaction by the builder or seller for which the buyer pays nothing additional and which the seller is not customarily expected or required to pay or provide. 

b. Seller Concessions

Seller concessions include, but are not limited to, the following:

·   payment of the buyer’s VA funding fee

·   prepayment of the buyer’s property taxes and insurance

·   gifts such as a television set or microwave oven

·   payment of extra points to provide permanent interest rate buydowns

·   provision of escrowed funds to provide temporary interest rate buydowns, and

·   payoff of credit balances or judgments on behalf of the buyer.

Seller concessions do not include

·   payment of the buyer’s closing costs, or

·   payment of points as appropriate to the market.

·   Example:  If the market dictates an interest rate of 7½% with 2 discount points, the seller’s payment of the 2 points would not be a seller concession.  If the seller paid 5 points, 3 of these points would be considered a seller concession.

c. The Problem

In some localities, builders or sellers offer concessions as a competitive tool.  In extreme cases, the concessions may entice unwary and unqualified veterans into home mortgages they cannot afford.  The concessions may disguise the veteran’s inability to qualify for the loan.