How does the realtor discount seen by redfin, i-agent and others actually work?  Can I take that and apply it at closing in combination with a not uncommon 3% seller concession?

Dolenders allow this or does it vary by lender whether they will allow both?  I am looking for a condo in close-in Arlington or some spots in DC and figuring on a 30-yr FHA loan.

For an FHA Loan:

Seller concession's (or any concessions for that matter, including Realtor rebates) can only be used toward one time nonrecurring fees and prepaid items, otherwise known as closing cost.  If you plan on paying your FHA Upfront PMI (2% of the sales price) at the time of closing (vs rolling it into your Mortgage balance as I have seen most of my clients doin) than your closing cost will probably be around 5% of the sales price and you will be able to use your rebate on top of your 3% seller concession.

If you roll your upfront PMI into your Mortgage than your closing cost should not exceed 3%, hence you would not be able to apply the Realtor rebate at closing. The bank will not allow concessions to be used toward your down payment. In this case you would receive your rebate in the form of a check after settlement.

For Conventional Financing:

The same rules apply regarding how you can use concessions, so unless you are paying multiple points up front there should not be a reason for your closing cost to exceed 3%. 

Khalil

I-Agent Realty