Fannie Mae, Freddie Mac, and the Federal Housing Administration (FHA) have all unified their position on accepting seller-paid buyer broker fees. In lending, these seller-paid fees are often called IPCs or Interested Party Contributions. Included at the end of this post, in Additional Resources, you will find the full memos released by all three entities. Let's take a look at some highlights:
Fannie Mae - Selling Guide B3-4.1-02, "Interested Party Contributions (IPCs) permits interested parties (including property sellers) to make contributions to the borrower’s closing costs subject to maximum limits ranging between 2% and 9% of the property value. Typical fees and/or closing costs paid by a seller in accordance with local custom, known as common and customary fees or costs, are not subject to the IPC limits described in Selling Guide B3-4.1-03, Types of Interested Party Contributions (IPCs). If a seller or seller’s real estate agent continues to pay the buyer’s real estate agent commission in accordance with local common and
customary practices, these amounts are not required to be counted towards the IPC limits for the transaction."
FHA - "Under existing FHA policy, if sellers continue to pay buyer-side real estate agent commissions and fees as a manner of state and local law or custom, and if the commissions and fees are reasonable in amount, existing policy would not treat those payments as interested party \contributions provided all other requirements are met."
Freddie Mac - In Guide Section 5501.5, "property sellers are permitted to make financing concessions toward the Borrower’s Closing Costs in maximum amounts between 2% and 9% of the property value. Fees or costs customarily paid by the property seller according to local convention are not subject to these financing concessions limits. Buyer agent fees have historically been fees customarily paid by the property seller or property seller’s real estate agent, and, as such, they are currently excluded from these financing concession limits. If these fees continue to be customarily paid by the property seller according to local convention, they will not be subject to financing concessions limits."
As the name suggests, seller-paid buyer broker fees are the compensation the seller provides to the buyer's broker for their services in facilitating the transaction. The decision of Fannie Mae, Freddie Mac, and the FHA to let it be known they will continue accepting these fees is a significant move that should help standardize industry practices. This unified approach will establish consistency within the real estate practice, simplify transactions, and promote transparency and fairness. It seems to be, then, that the key to this practice's continuation is keeping the seller or their broker paying the fees so it remains 'local custom.'
If you need to know how to ask for the seller's concession toward the buyer broker fee, Oregon Real Estate Forms has a form for this purpose, OREF-048. The form is copyright-protected and for use by subscribers only. Here is a sample copy: https://orefonline.com/wp-content/uploads/2024/05/SAMPLE_OREF-048-Seller-Contributions-Addendum.pdf
Additional Resources
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(C) 2024 Jeff Sorg
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