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Illinois industry appointments update - 06/28/2006

National Mortgage Professional
Jun 27, 2006

Down payment and donative intentElisa BlackDown payment assistance John and Susan Jones (names changed to protect the generous) had lived in a small farming community all of their married lives. Their children are grown and now have children of their own. So, John and Susan decided to sell their house and move into their dream home. This was the home they'd planned and saved for. It was big enough to accommodate the children and grandchildren at holidays. A young couple, first-time homeowners, purchased the Jones's old place. "We remember how difficult it was starting out," said John. "We wanted to make the purchase as easy and simple as possible." So, John and Susan allowed a down payment grant to be used in the purchase of their old home. There are two misconceptions about down payment grant programs. The first is that John and Susan paid the down payment for the family purchasing their home. The second is closely linked with the first, namely that the down payment organization isn't a charity so much as it is a company brokering a deal between buyer and seller. When the young couple came to the closing, the money for the down payment had arrived courtesy of the charity providing it. After the sale had finished, John and Susan authorized their closing agent to disburse a predetermined portion from the proceeds of the sale to the charity that had provided the original down payment grant. Where will John and Susan's money go? It will go to assist the next individual or family that applies to the charity for a down payment grant. It is vital to understand that in the entire transaction, John and Susan Jones are supporting the mission of the down payment program to help others achieve homeownership and enjoy the benefits that they have experienced. But, let's get real. If John and Susan had said no to the buyer's idea of using a down payment grant, would their house have sold? Probably. But in the Jones's case, they didn't wait to see what other offers came in. When the potential buyers came forth with their offer, the Joneses were genuinely pleased at the idea of supporting families just starting out. They participated in the program with genuine donative intent. So, the question is: are sellers receiving incidental benefits? Is this a bad thing? Does this mean that sellers are not charitably minded? I donated to the Salvation Army, which resulted in me having a cleaner closet and a doughnut on the way out the door. Should I return my doughnut, lest I not be acting in the true spirit of charity? (One could argue that the doughnut is a significant factor in my expanding waistline, which directly results in more donations of clothes to the Salvation Army.) Non-profit down payment organizations have created a unique opportunity for home sellers to become considerable charitable forces in their communities. When a seller sells his home, he is making the biggest sale of his life. This is probably the biggest single financial windfall the seller will experience in his lifetime. The seller's disbursement to the charity comes directly from the proceeds of the sale. There is no better or more convenient time to make a charitable donation to a non-profit organization that promotes homeownership. A person selling his home will have experienced the benefits of homeownership. The seller can understand the significant financial, social and emotional advantages his donation will give a future family. Also, at the time of the sale of his home, the seller has probably never been in a financial position more conducive to donating to a charity. We are doing a disservice to sellers when we accuse them of lacking in charitable or donative intent. We are also implying that the only reason a house would sell is because of the potential down payment grant. This implication dismisses the role of real estate agents entirely and suggests that they could be completely replaced by a "zero down" placard in the front yard. At the heart of the matter of non-profit down payment organizations is heart. They call it charity for a reason. Down payment charities have found an ingenious way to enable the seller to become a significant charitable force without having to forgo regular eating habits and allow young families to get into homes faster. Do you regularly use down payment grants with your home loan products? Ask your down payment organization where their money goes. Look to see how their funds are being used in the community. Ask how you can become involved. Chances are, they can help you become a significant charitable force, too. Elisa Black is director of marketing and communications for the Esther Foundation, a Utah-based non-profit organization that works to strengthen communities by helping people to become homeowners. She can be reached at (866) 743-7795 or e-mail [email protected].
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