The “Incentives” That Condo Conversions Force On First Time Home Buyers

If a store raised all of their prices by 30 percent and then held a 30-percent markdown sale, is that really a sale? Not according to most people, but that is often what sellers of condo conversion units do to their first time home buyers. Here is how the whole things works. 

The condo conversions will normally have a preferred lender. Quite often this is a reputable lender such as Countrywide. The converter will claim to offer an incentive to buyers if they use the preferred lender. One has to read the fine print to find out what the real story is. What the converter often will do is to initially force the first time home buyer to pay for closing costs that are customarily paid for by the seller, and then offer to cover those closing costs if the first time home buyer will use the preferred lender. They raised the price of the loan by $3,000 and then offer to give a $3,000 “incentive” if the buyer will use the preferred lender. “Blackmail” might be a more accurate term than “incentive.” 

The converter’s offer implies that the buyer will pay, for example, $3,000 less in closing costs than the buyer ordinarily would if the preferred lender is used. In truth, the actual offer is that the buyer will not pay $3,000 more than they normally would if the first time home buyer will use the preferred lender. More of a rip off than a deal, I’d say. 

Buyer’s agents need to be aware of this when they enter into negotiation with the condo conversion seller. If you have a loan officer that you like to use, don’t allow your loan officer to get negotiated out of the transaction by allowing seller closing costs to be pushed on your first time home buyer.

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