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beep_11 | What's a high real estate commission ? |
What real estate commission is considered too much that would be questionable for lenders?
Additional Details
Have lenders denied the loan coz of higher commission than norm? |
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Luis S
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Yes, lenders have begun to restrict the commissions, and these changes have been coming from the agencies, such as Fannie Mae and Freddie Mac, which govern the guidelines for ALL conventional loans in the United States.
A lender may DENY the loan for it, but they have the right to cap the transaction, as has happened in several cases. This is happening mroe with builders, than in normal every day transactions, because builders pay out bonuses to realtors for bringing them business in excess of the agreed-upon commission.
Sometimes these get over 10% of the total price, and FHA has also begun restricting this, and many lenders are now getting on board with their portfolio and non-conventional loans as well, as they are now being considered concession when in excess of 9%, or even predatory.
A lender would deny it in the followign scenario...
You are looking to get qualify with say 3% down... say the builder or seller is paying the agent a total of 15% combined commissions. According to some of the new guidelines, the price of the home for LENDING pruposes only would be reduced by 6% (15-9 is 6). So a 200K home is now only lendable to 188K, follow me?
So you need to bring the 6% plus your prior downpayment amount, and poof, if you don't have the cash you are denied, does this make sense? It's like a lender would lend to the lower of the appraised value or the sales price.
What is going on is that lenders, and the agencies want people to have some skin in the game, and avoid situations where realtors get too much money, or influence a buyer to buy a home because they are getting a huge bonus... does this all make sense? |
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iltmaemc
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real estate commissions are negotiable. customary is 6% of sales price, divided 50/50 between sellers agent and buyers agent. it has nothing to do with lenders. yet lenders do charge points for the amount of a loan. 1 point is 1% of the loan |
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Ross
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Depends on area. We have many homes in my area priced under $100,000 and usually 7% for them. With lower priced land I have seen commissions as high as 10%. With homes priced $100,000 plus as low as 6%.
Every area is different.
ADD: To be leagally correct I must state this is what I charge. I cannot speak for anybody else. I don't want anybody to think that there is any price setting in my area.
If there is a "normal" price that could suggest price fixing so that would be illeagal.
ADD: For those saying 7-10% is high there are different things to consider. In my area it is not uncommon to have a 20,000 sale esp when it comes to land. Offer a 5% comsion won't pay the bills so in those case he commsion has to be higher or the property won't bet listed. Most our homes run around 100K and commsions are higher in our area I suppose than many others but at 5% or lower couldn't feed my family. |
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Real Estate Guy
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YES!!!!!!!! lenders can review the commission. A high commission usually means that there may be a kickback. |
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Dan Alman
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6% is high in my opinion. National average is just over 5% these days, and you can do even better than that if you negotiate.
Check out seekingagents.com for an easy way to find and compare high-quality real estate agents.
And yes, lenders will absolutely look at any commission above ~7% as a potential conflict of interest.
Thanks,
Dan |
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Dawni Do Right
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We are offering 8% selling office commission on our new construction homes & we haven't had any problems. Our builders are offering it because they need these home sold yesterday. We are getting our norm of 3/1.5 |
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Dale H
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I am a lender and I find the fact that 6% is customary to be highly questionable. :-) |
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Marysue
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Lenders don’t care about commission. The lender is giving you, the buyer, a loan to buy a house. Normally it’s the seller who pays agent commissions. Your lender couldn’t care less what the seller pays the agent(s) involved. |
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angela
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Lenders don't have anything to do with real estate commissions. Generally, the seller pays the commission and it is decided between the seller and the Realtor. It's hard to say what would be too high because the rates vary by location and broker. |
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daeve930
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The lender doesn't care about the real estate commission. They won't even look at it. |
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