Buyer's Guide
Extra Costs for the Seller
If you are obtaining a VA or FHA loan in order to
finance your purchase, you must include that information
in your offer. This is because government loans place
additional financial and performance obligations on the
seller.
Non-Allowable Fees: First, VA and FHA loans prohibit
buyers from paying certain types of fees that are often
charged by lenders, escrow companies, settlement agents,
and title companies. They are called "non-allowable"
fees. They still get charged anyway, but as the buyer,
you are "not allowed" to pay them. The result is that
the seller ends up paying them instead of you.
Most of these "non-allowable" fees come from your
lender. By the time you are making an offer you should
have already been pre-qualified by a loan officer, so
you or your real estate agent can ask how much the
lender’s non-allowable fees will be. Experienced agents
should also have an idea of what non-allowable fees will
be charged by the escrow or settlement agent and the
title insurance company.
Since these are fees the seller would not pay on an
offer with conventional financing, this information must
be included in your offer. You should also realize that
since the seller will be paying these additional fees,
they may be a little less negotiable on the price.
VA and FHA Appraisals
Home appraisal inspections on FHA and VA loans are a
little more detailed than on conventional loans (and
more expensive). The appraisers are required to perform
certain minimum inspections as well as evaluate the
market value of the property. Although these inspections
are not as detailed as a professional home inspection
and should not be considered a substitute, sometimes
repairs are required.
These are additional costs the seller would not be
obligated to pay for someone obtaining conventional
financing, so your offer should include a maximum figure
for these repairs. Otherwise the seller is signing the
equivalent of a blank check, and they do not want to do
that.
At the same time, whatever figure you put in will
most likely affect the seller’s willingness to negotiate
on price. If you put $500 as an estimate, the seller may
be $500 less negotiable on their price. If no repairs
are required, you may have been able to get the house
for $500 less than what you and the seller agreed on as
the price. The solution is to add a clause to your offer
that goes something like this. "If required repairs cost
less than the maximum amount allowed, the excess will be
credited toward buyer’s closing costs."
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RealEstate ABC. No articles may be reprinted or
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