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  Institute of Housing Technologies
Improving the Real Estate Information Network
The Great Concession Misrepresentation
Concessions are defined as: a benefit or discount to help close a deal, 
usually specified during negotiations. Concessions are usually included 
in the closing costs of the deal. It is also defined as; anything of value 
added to a transaction by a seller, builder, developer, salesperson, or 
any interested party. 

Like most of the real estate industry, when it comes to Concessions, “it depends” applies to any discussion. Much like square footage, there are a world of differing opinions on the topic of concessions; when and if they should be reported, do they make a difference in home values, and if it is the listing agent’s responsibility to report this information within the Closed or Settled MLS data. If you want to start a heated debate in any agent or appraiser class, the topics of square footage and concessions will get things going… 

Concessions are another piece of information that contributes to the overall valuation puzzle. Without them, the puzzle will never be complete. They are a written part of the contract and in most cases, the information is easily available to the listing agent. Negotiations, after the contracts are signed, are rarely included within items that would be classified as concessions. Concessions can change home values and actually inflate a neighborhood market if they are not reported. If a house sold for $200,000 and the seller paid $6,000 in buyer’s closing cost, the house actually sold for $194,000. If you’re a buyer’s agent working in that neighborhood and trying to help your clients determine a fair offer price on a similar home, would that information not be important to you? It is to an appraiser. It affects the bottom line and therefore should always be reported in the MLS closed data. 

Concessions are one more statistic that helps all those who depend on MLS to follow market trends. Without this information, the MLS is one step down the information chain and can more closely resemble Zillow®, Trulia®, or any of the other real estate information sources. Agents must understand the value in “information.” To develop reliable valuations, the information on concessions is a must. The Sold data reported through MLS is one key to accurate CMA’s and appraisals. Better info in, better info out. 

Along with square footage, if the MLS also contained accurate information on concessions, it would help the MLS to remain the stand out leader in real estate information services. Is the MLS still “the world’s most trusted SOURCE of real estate information?” It depends… We advertise to the world that “we” (the MLS) is the absolute authority on real estate information, but then we tend to be worried about liability or spending our time, or have some reason why we don’t want to be held responsible for reporting this data (the data that we all use to develop our professional opinions of value). The information that is reported one sale at a time by each listing agent, each one equally powerful. The more information you have the better decisions you can help your clients reach. The less info that is reported within the MLS, the more we look like all the other real estate information sites that depend on public records for all their information. That leaves little to separate us or make us stand out from the pack. Instead of going more towards just a marketing site, we have to remember what helped the Realtor® Empire to grow in the first place; information. Touted as the most reliable real estate information available anywhere in the world. Without that fact, Realtors® lose a little of their shine. The MLS and Realtor® organization are leaders in the real estate industry, in large part, because of “information,” reliable information. 

Concessions are one of those fields that absolutely ought to be mandatory! When it comes to tracking trends and patterns, and recognizing changes in the local market, this is one item that influences the seller’s bottom lines. If it’s not reported then other agents can’t report the trend to their sellers. It’s a vital piece of data that helps to gauge activity and patterns in the local market. 

The MLS is often full of errors; things like tax or parcel numbers, tax amounts, schools, attached for detached, ages, amenities, no separation of square footage totals for basements or lower levels (that’s another topic for another day, but YES it matters a great deal). Far too often, it appears just sloppy and seems no one cares, after they close. We often hear, ONLY appraisers need that info. Why should I spend my time looking up that stuff? Well, the answer is, it should be important to you! If you need an acceptable appraisal for the homes that you sell, these details matter. You are the main information source for your peers and for appraisers. Without the MLS and listing agents providing the accurate and complete listings details (and photos) appraisers can’t do their job properly and eventually that works its way back to the agents in low appraisals, loan delays, and lost sales.  

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The way I learned about concessions was to think about real money coming out of the seller’s pocket, not the lender. I want to know what did not end up in the seller's pocket. If a lender pays it, I don't count it. If a seller agrees to pay closing cost for a buyer, that is a concession. Cash money that affects the home’s actual sales price. Try to think of anything that alters the home’s final sales price. If the seller paid real money out of pocket to make the sale work, that reduced the final price of their home, that is a concession and a material fact. 

I learned that most “repairs” are not counted. A repair may be necessary, but if ten owners are required to perform a similar repair; one may do it themselves, one may get their cousin to do the work, one may hire the cheapest guy in town, and one may hire the most expensive person they can find just so they feel like they have done a good job. It is not a “fact” or a verifiable number. The house is basically being sold at a given price based on it being in a given condition. The repair just brings the house to that condition and is not the same as a paid concession that specifically reduces the sales price.  

Concessions that are real money, paid by the seller, and which reduces the amount of funds they walk away from the closing table with, SHOULD be listed in MLS. It should show up as a reduction from the sales price in the appraisal report. But, they can only be listed in the appraisal report (or CMA) if the listing agent reports it correctly. If the closing calls for a $2,000 payment for closing cost plus $2,000 worth of repairs, it is imperative that it be reported just that way. It can’t just be listed as a $4,000 concession. Just like comparing houses, concessions must provide apples to apples comparisons. Then there’s the question of commissions. If you had to reduce your commission by $2,000 to make the sale work, is that not real money that affected the home’s sales price? If certainly affected your bottom line. That’s an issue with a wide range of opinions and another area where there should be national guidelines. 

Many MLS systems have these fields, but there is confusion about how to fill it out and it is too often left blank. Many field are simply not filled out by Realtors® in the MLS. And, even when there is a mandatory reporting requirement, it is often not enforced. It must be made easy and everyone must understand what the field is asking.  

Many MLS systems just use a “Yes” or “No” field for concessions, leaving the inevitable phone calls from appraisers. Calling agents for concessions data is a waste of time for appraisers and agents. And, some appraisers do and maybe some don’t. If they don’t, and the information is not listed in the MLS, then someone’s value is going to be inaccurate. Many agents talk about having to look at the HUD closing forms and don’t want to take the extra time to gather this information. However, the information should be on the offer to purchase and contract and does not require any additional steps. 

Even if the MLS does not require a specific concession listing, there is generally a field, line, remarks section, or some area to list extra details and concessions can be typed into some location within the closing data. In reality, if this information is not fielded out and an appraiser has to call the listing agent to check on this data, it can take days for an agent to call back with the information - usually a day or 2, even a week, after the appraisal is due. Many appraisers make comments like “sometimes it’s like pulling teeth to get an agent to actually look in the file and give it to you. By then the appraisal had to be finished and is adversely affected. Someone may have just lost a transaction they spent the last three months working on. Business is too tough these days to lose sales that could have been saved with just a little more information.  

Remembering there are over 800 private and locally owned and operated MLS systems, it’s easy to understand how there can be differences. In my opinion, the information basics (which includes square footage and concessions) should be mandatory in any closed MLS listing. It should also be reported in a manner that is uniform throughout the Realtor® membership, and on a form created and mandated by the National Association of Realtors®. This information can help to make us all better at our jobs and also help to improve consumer protection. There is so much confusion over this issue that the only way to truly define what is and is not a “concession” is for the national Association of Realtors® to create a mandatory policy for reporting concessions to the MLS. I can only hope…