Friday, December 30, 2011

Does propane reimbursement count in the minimum investment seller assist calculations?

We closed on our property December 23.  The agreed upon contract was $325,000 and seller concessions of $5,000.  At the closing table, we found out that due to the terms of our loan, we had to have 5% down into the purchase price which would decrease the seller concessions to approximately $2700. We were contacted by the seller's agent yesterday b/c she forgot to have the propane in the tank figured into closing, which would mean we owe an additional $1100.  It was in the contract that we would pay for the propane in the tank, but I didn't know if this additional amount would in any way affect the amount of closing costs they paid. We want to do what is right, but we don't want to be taken advantage of, and we want to make sure we ask all of our questions before agreeing to pay for the propane in the tank.
Thanks in advance,

Hi, Melanie:  I always feel bad to hear that this news comes at the closing table but it's not rare.  These types of calculations by lender closing departments often happen within hours of the closing.  There is always the option of postponing closing while the contract is renegotiated.  Most people don't want to delay and go back through underwriting so they close and the seller gets more money than they bargained for.

On the propane, that's personal property which wouldn't be figured into the underwriting minimum closing investment.

As for what to do now, I will answer this from the perspective of a former mortgage underwriter.  Since the sales contract you presented to the mortgage lender was the basis for the loan approval,  I would ask the lender - in writing - if they care if you renegotiate the propane clause in a way the forgives you paying the seller for the gas.  They may or may not care but having an email or letter in your file will protect you if your file is selected for a quality control audit and someone thinks perhaps you tried post closing to get around their closing cost guideline using the gas.

Good luck and I wish you well in your new home. 


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