Buyers' Agent Claims an "Appliance Allowance" is Illegal . .???? (Niota: sales, mortgage broker)

[addsubtract]

I found a home that might work, except all the applicances and the HVAC are extremely old. I told the buyers' agent that I wanted to ask for an applicance allowance as part of the offer. The buyers' agent told me that an applicance allowance was illegal because no money could change hands at the closing and if the seller bought them before closing, and the deal fell through, it would be unfair. He told me the only possible thing I could get from the seller was to ask the seller to pitch in the old antique refrigerator that was sitting in the garage. He said any type of credit for appliances was simply illegal and impossible. Similarly, I had wanted to HVAC updated as part of the agreement. He said unless it was completely broken the best I would get was to be told at the home inspection that I would need to purchase one in 2 to 5 years, so I could financially prepare for the purchase.

I'm very confused because I have seen many listings that say "Paint Allowance," "Carpet Allowance," and even "Appliance Allowance."

The buyers' agent told me if I didn't have the cash upfront for the new appliances then my mortgage lender would just loan me the additional funds for it. The mortgage lender said they don't do that and if a home needs a new appliance, that is just included in the purchase agreement.

I'm very confused -- and concerned.

Also, my mortgage lender has to do a property inspection before the loan is approved. They do it within 7 days of receiving the signed contract. The buyers' agent told me that I had to have a home inspection completed within 7 days. I told him that I wanted to get the mortgage lender's physical inspection of the property done first before paying money for the home inspection. I said I was concerned that I could end up paying for a home inspection on a property that the lender looked at and didn't approve. The buyers' agent told me that I very well may lose my money paying for an home inspection on property the lender did not approve, but that the home inspection simply MUST be done within 7 days of the seller's acceptance. That doesn't make sense to me because the "7 days" is a blank that the buyer fills in on teh contract -- why not fill it in to say 7 days after the mortgage lender's inspection and approval of the property or something similarly protective of me?

That makes no sense to me. I'm a first time buyer and concerned

Any insight or suggestions?

[jessyj2009]

Get a realtor of your own hun. It's not illegal unless TN has it's own law that I don't know about. What they do is bring down the price on the home to adjust for you having to buy all new appliances. It'd be best if you got a realtor so they can talk to you about these things. They know things you don't. Don't get taken advantage of.

[TN Gal now]

was told that cash cannot be given/rebated by the seller to the buyer at closing. However, it is possible (I believe) that money can be placed in escrow for the purchase of the appliances, repairs, etc. to be done after closing. That way the seller is protected if the sale falls through. I did that on a house I sold several years ago, escrowed money for sewer connection. The contract just has to be written properly. The other alternative is for the buyer to lower the price of the house to accomodate the cost of the appliances or repairs.

And the home inspection should be done first. No reason to put the lender through the time and expense of preparing a loan if your inspection fails. And no reason to tie it up on the seller's end either and possibly delay or lose another sale opportunity. It's a gamble on your part, but worth it. I paid for two inspections on houses that failed, but it was money well spent because it prevented me from purchasing a money pit. And get a realtor to represent YOU - someone who works just for you.

Good luck!

[donald cherry]

and dont forget the higher the price ,the more the realtor makes,,,,,,,,,,so if you take an allowance less for the realtor, poor realtor???

[hiknapster]

Well, this guy has probably already had the issue resolved, but in essence, lenders and the feds have tightened the rules so that money no longer changes hands at closing. By the way, the mortgage broker handles that, not an agent. However, I would definitely ask for less because he wants an appliance credit.

If memory serves, though, this guy's lender is USDA or something like that. He is definitely dealing directly with the feds for his loan, so he is getting his info right from the source.

Also, bear in mind that once the inspection is completed, if the inspector tells you that something has to be repaired you can counter-offer with a lesser price. If the repair does not need to be done for a few years there is nothing stopping you from asking for less, anyway. Your agent should offer the price that you want to pay. It's your purchase. They can give you advice but in the end it comes down to what you are willing to pay and what the seller is willing to accept.

By the way, that is why you have the home inspection first. Your agent should make the offer to purchase contingent on the property passing the home inspection. And generally, the buyer pays for the appraisal, unless the seller is paying closing costs.

The difference in my commission on $95,000 price tag, as opposed to a bottom line of $100,000, is going to be about $84. But if the customer is satisfied and tells his friends and family, or uses me again, down the road, then I have made that money back in spades. It's common sense.

[FLORIDA TO NIOTA 2010]

If you haven't already made your offer or they haven't already accepted your offer. Can you make an offer by lowering the offer price enough to cover the cost of new appliances? Then you wouldn't be asking for the (illegal) appliance credit. Just a thought.

[hiknapster]

Originally Posted by FLORIDA TO NIOTA 2010

If you haven't already made your offer or they haven't already accepted your offer. Can you make an offer by lowering the offer price enough to cover the cost of new appliances? Then you wouldn't be asking for the (illegal) appliance credit. Just a thought.

I probably wasn't clear, but I just said that.

[FLORIDA TO NIOTA 2010]

Originally Posted by hiknapster

I probably wasn't clear, but I just said that.

hiknapster - Sorry about that, I just quickly scanned through. I guess I missed it. Because I know that you would know more about this subject than I would for sure. That's your field.

[hiknapster]

Originally Posted by FLORIDA TO NIOTA 2010

hiknapster - Sorry about that, I just quickly scanned through. I guess I missed it. Because I know that you would know more about this subject than I would for sure. That's your field.

Thanks, but I am sure I was not too clear. I was half-asleep!

What I essentially was saying is, if you want $5,000 for new appliances then offer $5,000 less. If they inspector tells you that a new roof will probably be needed in a few years, then offer them $10,000 and make sure your agent communicates that you know the roof is going to need to be replaced fairly soon and you prefer not to incur that cost. Maybe they will counter offer with coming down $7,000 and on it goes...

[Josh Woods]

I am also a licensed TN Realtor and my understanding was that allowances at closing not acceptable. However, there are ways around everything:

1. Make the allowance part of your closing cost assistance. In most loans, closing cost assistance can be up to 6% of the purchase price, but usually 2.5-3.5%.

This way if you were already paying your closing cost, you will have the money in your pocket to complete your appliance purchase. This is a way around what you are trying to accomplish.

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I will say this. I have done two closings this year where the attorney/title company did allow money to be credited for repairs at closing. My most recent issue was where there was inadequate insulation in an attic (discovered at final walk-thru in July) when original purchase and sales date was March (cooler weather). The attorney allowed a $1,200.00 repair allowance for insulation and my broker and cooperating broker agreed.