Seller concessions are not uncommon

Q. I sold my house by contributing to the buyer's down payment for a mortgage. I realized that the next would-be buyer might not be able to get a mortgage to buy the house even though the price had been dropped. So rather than drop the price again, I contributed several thousand dollars for their down payment to buy now. All the details were taken care of at the closing. At the time, I was under stress from my wife's death. But I have no regrets about the sale that was completed. Did they take advantage of me?

A. Your experience was fairly common, and you needn't have any regrets. What you agreed to pay was probably something toward the buyers' closing costs: their prepaid insurance premiums or property taxes, items for which they needed cash at the final settlement. That help is known as "seller concessions."

It's worth inquiring, when you hear what a house sold for, whether the proceeds were really less because seller concessions were involved.

In some areas, houses are in such demand that buyers are competing frantically. Elsewhere, though, sellers need to be open to the possibility that a written purchase offer will include a request for concessions. That's particularly true with first-time buyers who don't have a great deal of extra cash.

Some homeowners take the matter into account when they set their asking prices. There's always the danger, though, that a too-high sale price turns out to be more than the lending institution thinks the place is worth. The report comes back that "the house doesn't appraise," the buyers can't get a loan for the amount they need, and you're back to square one.

Currently, HUD allows sellers to pay up to 6 percent of the sale price to help buyers with their closing costs on FHA mortgages. The VA sets a limit of 4 percent on VA loans. Conventional mortgage plans vary, but many set possible concessions at no more than 3 percent of sale price.

Q. We bought a condo in Florida as a second home in early 2008 (yes, bad timing). We sold it a few months ago for less than the original purchase price. Our accountant says we cannot take the loss off on our income tax return because we never rented the condo out to someone else. Is he correct or should we find another accountant?

A. Hang on to that accountant. He speaks the truth.

The IRS says you can't deduct a loss on the sale of a second home, any more than you could if you sold your second car for less than it cost. For tax purposes, the property is treated as a personal use item, not an investment. A loss on the sale of your main home wouldn't be deductible either.

Q. I read that mortgage interest decreased last week. Please send details on how I go about notifying my bank. I read this somewhere before and received no cooperation from my bank at that time.

A. I'm afraid that news report was about the rate on new mortgages being placed. If yours is a fixed-rate loan, as most are these days, the word "fixed" means just what it says. Current changes in interest rates don't affect you.

If, on the other hand, you have an adjustable-rate mortgage, you'll probably see some change when the scheduled date for your adjustment comes up. Your new rate will depend on what average rates are at that time.

Q. My son is buying a two-family house. Why does he have to pay for the bank's lawyer? Also who pays the real estate agency? Please answer as soon as possible. I would like to get this information before the closing date.

A. Lenders require the borrower to pay for the bank's attorney's work on a new mortgage. It's worth remembering that although paid by the buyer, that lawyer is looking out for the bank's interest, and not necessarily the buyer's. But your son agreed to that when he applied for the mortgage loan. It's their bat and their ball, and he has to play the game by their rules if he wants to borrow their money. That's just the way it is.

The real estate broker's commission is usually paid by the seller. It's always possible, of course, that your son hired his own real estate broker, with a written contract specifying under what circumstances he would pay a commission himself. That might come into play, for instance, if he ended up buying a for-sale-by-owner property, with a seller who wasn't going to pay for the agent's services.

• Edith Lank will respond to questions sent to her at 240 Hemingway Drive, Rochester, N.Y. 14620 (include a stamped return envelope), or readers may email her through askedith.com.

© 2014, Creators Syndicate Inc.