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Author Topic: Two step closing? Legal?  (Read 1989 times)

Offline Simbajoy

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Two step closing? Legal?
« on: October 16, 2006, 06:53:28 am »
Hi,

I have a home that I'd like to sell to an investor. He will give me the money I asked for IF I do a two step closing.

Here's his explanation: The 2 part close is basically a 2nd outside agreement
with the seller. It goes like this: Buyer and seller
agree on a price for the property (for this example
we'll use 100K for the purchase price), the buyer
submits a purchase contract for the agreed upon
purchase price + what he would like to add for repairs
on the property (We'll use 30K). The buyer just
submitted a contract for 130K but we have a 2nd
binding agreement, when the house closes the seller
will cut a check to the buyer for the 30K that was
added to the purchase contract.

It sounds straight forward enough, but it's the first time I've heard it and just want to be sure this isn't something that will bit me in the butt.

Thanks,

AB

Offline real estate 001

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Re:Two step closing? Legal?
« Reply #1 on: October 16, 2006, 01:52:32 pm »
sounds like a tricky way to get your  rehab money  upfront so to speak ??


 WOW you would really have to have a cood contract  with the seller  and tust they alot  on this type deal as well

Offline reiauctions

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Re:Two step closing? Legal?
« Reply #2 on: October 16, 2006, 02:14:44 pm »
Sounds like it could be illegal to me.  If you have a lender(bank) lending money based on a $130,000 contract and then have you write a check for $30,000 you are misrepresenting the sales price of the house to the bank.  

I think you just need to ask yourself, would the bank care if they found out?

Also, what if you decided not to give the $30,000 back, what kind of legal action would the buyer have?  ... I think none.
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Tom Wood

Offline morningsong

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Re:Two step closing? Legal?
« Reply #3 on: October 16, 2006, 03:12:02 pm »
The way I am doing this on a house I'm in escrow in now is that when I made my offer I asked for a 6% seller credit, so they will be legally writing me a check for the rehab I plan to do.

Offline Simbajoy

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Re:Two step closing? Legal?
« Reply #4 on: October 16, 2006, 03:47:41 pm »
Thanks so much for responding.

I see now that this buyer is essentially asking me to lie and he's trusting me to give him part of the money I receive at closing.

Wow...  How disappointing that people just won't do the right thing.

andrea

Offline 71tr

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Re:Two step closing? Legal?
« Reply #5 on: October 16, 2006, 05:13:31 pm »
Yes this would likely violate federal law, defrauding a federally insured financial institution.  This is not something you want to do.

 




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