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GNND Program: How to Save $$$

10/29/2008 - By Jack Burns

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Save Money. Reduce Broker Commission

Police Officers and other First Responders are required to use a real estate broker to purchase a Good Neighbor Next Door Home. Save thousands of dollars on your purchase by negotiating your broker's sales commission.

How to Save Thousands of Dollars on Your Good Neighbor Next Door Home Purchase.

 

By Jack Burns

 

Police officers and other eligible first responders are now required under the new Department of Housing and Urban Development (HUD) Good Neighbor Next Door (GNND) Program guidelines to use a real estate broker to purchase a GNND home.  If an officer or other eligible first responder is unaware on how a broker calculates his or her commission, they could be charged thousands of dollars in extra broker commissions. 

 

Is a 10% Broker’s Commission Fair?

 

Brokers who assist officers and other first responders with GNND purchases most often calculate their commission based on the list price of the home and not on the officer’s discounted price.  Without a HUD imposed cap on a broker’s sales commission, a first responder or teacher participating in the program can be charged an excessive amount, which can equal to 10% of the discounted purchase price. 

 

For example, if a first responder or teacher wins a GNND home with a list price of $100,000, their discounted purchase price will be $50,000.  Unless a first responder or teacher is aware of what price his or her broker will use to calculate their commission, a real estate broker can calculate their commission using the $100,000 list price which if we use a 5% commission rate equals $5,000 (100,000 x .05 = $5,000). 

 

Using the same 5% commission, if a broker calculates their commission on the $50,000 discount purchase price, their commission would equal $2,500 (50,000 x .05= 2,500) which amounts to a difference of $2,500 or a 50% reduction in commission and a substantial savings.

 

Choosing a Broker

 

When an officer is looking for a broker to assist him with purchasing a GNND home, look for a broker who has experience in dealing with HUD home purchases and is willing to negotiate his or her commission.  Reach out to other first responders and teachers who have participated in the program for references and to your friends and family members for potential referrals.  Only work with a broker who you feel comfortable with and will charge a fair commission based on your discounted purchase price and not the original list price of your home.   

 

Summary

 

Purchasing a Good Neighbor Next Door home can be completed without the assistance of a real estate broker. Under the former Officer Next Door/Teacher Next Door program, officers were not required to use a real estate broker to purchase a home.  Officers could see a list of homes on-line; place their own bids, view homes without a real estate broker, and purchase homes on their own.  But under the new guidelines, officers have to use a broker. When choosing a real estate broker, ask for referrals from your fellow officers, friends, and family and try to find one with experience purchasing HUD homes.  In order to save thousands of dollars on broker commissions, officers must fully understand how a broker calculates his or her commission and must negotiate the lowest possible sales commission before agreeing to use a broker to assist with a GNND home purchase.