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Author Topic: ADDENDUM TO PURCHASE CONTRACT  (Read 6857 times)

Offline will2

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ADDENDUM TO PURCHASE CONTRACT
« on: September 11, 2005, 12:19:52 pm »
I am selling a four unit apartment building which has bee appraized at $110K.  I am asking $100K for the building.  I have a buyer who says he will buy the building under the following conditions.
He will get a loan for the $110K, which will be given to me at closing, as per the purchase contract.  His lender is to know nothing about the ADDENDUM to the contract.  It states that I will give him a check for $10K after the closing.
My question is.....  Is this legal?  Can I get in trouble for doing this?  Is an ADDENDUM to a purchase contract enforceable?  HELP  I am considering doing it, because I really want to sell the house quickly.

Offline Roger J

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Re:ADDENDUM TO PURCHASE CONTRACT
« Reply #1 on: September 11, 2005, 03:49:25 pm »
No it is not legal and yes, you could get in BIG trouble for it.

What he is trying to do is commit loan fraud, which is a federal crime.  Contrary to it seems the popular belief, but people do routinely get caught for it and people do get to go to jail for doing it.

Here's the way to tell loan fraud.  If the buyer's lender doesn't know fully what is happening, then it's probably illegal.

Besides the illegal end to it, you are saying that you are getting $10K more in purchase price than you actually are.  That's $10K more that you have to pay taxes on that you didn't get.   What's his answer to that?

Raj
www.HickoryNCHomes.com Search for all Hickory NC Homes for Sale.

Offline will2

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Re:ADDENDUM TO PURCHASE CONTRACT
« Reply #2 on: September 11, 2005, 07:39:43 pm »
Thank you for the advice.  His answer to the reason for the addedum , is that the money is f9r repairs to the house, .  In reality, the house doesn't need any such repairs.  Even minor things would not add up to $10K.

Offline will2

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Re:ADDENDUM TO PURCHASE CONTRACT
« Reply #3 on: September 11, 2005, 07:44:46 pm »
If it is illegal.  who who get in trouble for it.

Offline Roger J

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Re:ADDENDUM TO PURCHASE CONTRACT
« Reply #4 on: September 11, 2005, 08:27:15 pm »
Both of you would get into trouble because both of you know that it is violating the law.

If he wants to make a repair allowance, and you're okay with that, then have it submitted upfront on the main contract and submit that to the lender.  In many cases, a lender will allow the seller to give a certain percentage kickback, either for downpayment, closing costs, repairs, or some of all.

You don't know until you actually legally try, though.

Good luck,

Raj

P.S.

If this buyer doesn't want to be upfront about this, then wait on another buyer.  It's not worth the potential legal problems this could cause you.
www.HickoryNCHomes.com Search for all Hickory NC Homes for Sale.

Offline will2

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Re:ADDENDUM TO PURCHASE CONTRACT
« Reply #5 on: September 11, 2005, 08:50:59 pm »
With all due respect.  You say that we would be violating the law.  What law ?  I've been told that what goes on in the parking lot after a deal is done is between gentelman, and is done all the time.  Who is going to complain?

Offline Roger J

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Re:ADDENDUM TO PURCHASE CONTRACT
« Reply #6 on: September 12, 2005, 06:20:11 am »
If you are going to do it regardless of what anyone says to you, then why did you come on this board and ask the question?

The first thing I taught my children was not to ask a question in which they may not like the answer, unless they are fully prepared to accept the answer that is given.

It is a federal crime to commit loan fraud.  If you get caught, you'll have to try to explain it to the big boys, not some local police.

If you want to actually research loan fraud, then pull up your search engine and type in loan fraud and law.  You'll get page after page after page of loan fraud info.  For you convenience, and those reading this, here is one article in particular that fits this scenerio.

http://www.realtor.org/rmomag.NSF/pages/lawoct03

Here's the bottomline:  As I said before, IF the lender does not, or cannot, know of all of the facts of the transaction, then it's loan fraud.

For a moment, let's forget about the potential of paying large fines and/or the possilibity of going to jail if you get caught.
Committing loan fraud is a crime.  It's illegal, immoral, and unethical.  It requires lying and cheating to make it happen.  It may look good to you, but if YOU were the lender, I doubt that you'd feel as good about it then.

If that is your idea of a "gentleman's agreement,"  then I guess I'm not a gentleman.

Raj
www.HickoryNCHomes.com Search for all Hickory NC Homes for Sale.

Offline will2

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Re:ADDENDUM TO PURCHASE CONTRACT
« Reply #7 on: September 12, 2005, 06:36:23 am »
I don't mean to sound like I"m going to do it anyway.  This guy was very convincing and I am really telling you the same kind of things that he was telling me.
I never did feel right about it even though I do want a quick sale on the property.  I thought that offering the property below apprazal value would help to do this.
I have not signed the addendum yet and after reading your comments, I won't be doing so.  I will print this conversation out and give a copy to the buyer so he will understand why I can't go through with the deal the way he wants.  Perhaps he doesn't realize that it is illegal.
I do thank you for your info on this subject.

Thanks again
will2

Offline tedjr

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Re:ADDENDUM TO PURCHASE CONTRACT
« Reply #8 on: September 12, 2005, 06:44:06 am »
Howdy All:

Great post Roger. The referenced article was an eye opener for me as well. I try to be as ethical as possible and a deal like this is tempting especially to get a deal done that has otherwise fallen apart. I remember deals from the past 7 years or more (statute of fraud expired already) where we gave the buyer $10K as remodeling allowance. I actually thought he was going to fix the 4 plex up with the money and the lender was going to escrow the money. I found out after the sale that the money went into the buyers pocket. That did not seem right to me and it was not. I just let it go. I will never do a deal like that again.

This deal where you say you are moving in and do not never has been right. If you get caught you will not have to worry about housing for a while. I have had the Federal Trade Commission Investigate an ex-partner and trust me you do not want these guys snooping around your affairs. I knew I had done nothing wrong back then but I was sweating big time just from phone calls from the Tmen. Stay away from fraud. I stayed one night in jail one time in my life and I will never do anything to even getting close to that place again. It just takes a few minutes of reliving that night and the horrible meals to keep me honest.
« Last Edit: September 12, 2005, 08:30:58 am by tedjr »
Ted P. Stokely Jr

San Antonio, Texas

Offline Roger J

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Re:ADDENDUM TO PURCHASE CONTRACT
« Reply #9 on: September 12, 2005, 07:02:15 am »
Will2,

Pleas forgive me if I seemed a little harsh there, but this has been the third post in as many days on this topic and it's beginning to get to me I guess.

Good luck, and if this guy doesn't want to do it upfront, then there will always be another buyer.

Raj
www.HickoryNCHomes.com Search for all Hickory NC Homes for Sale.

Offline John_NM

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Re:ADDENDUM TO PURCHASE CONTRACT
« Reply #10 on: September 12, 2005, 09:16:29 am »
Hey Raj,

You were not to harsh, you were right on. It did sound like he was starting to argue or disagree with you about it. PLEASE keep posting and being straight forward about your comments because it does help us new guys that read these posts.

John
« Last Edit: September 12, 2005, 09:17:02 am by John_NM »
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Offline Roger J

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Re:ADDENDUM TO PURCHASE CONTRACT
« Reply #11 on: September 12, 2005, 12:36:28 pm »
Thanks, John

It means a lot.

Raj
www.HickoryNCHomes.com Search for all Hickory NC Homes for Sale.

Offline $Cash$

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Re:ADDENDUM TO PURCHASE CONTRACT
« Reply #12 on: September 12, 2005, 02:25:38 pm »
Raj,

We go a fur piece back and you keep telling it like it is as I know you are doing it to keep our great industry moving forward.

Everytime someone gets caught committing fradulent acts it costs all of us in one way or another.

You know you have my backing and all of the creative investors who do it the right way and as one of the powers to be related to me:

We are not trying to run anyone out of the real estate business, only out of unlawful practices.

John $Cash$ Locke
« Last Edit: September 12, 2005, 02:26:29 pm by $Cash$ »
"If people like you they'll listen to you, but if they trust you they'll do business with you."
"Training gives knowledge, knowledge gives confidence and confidence gives victory."

Offline will2

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Re:ADDENDUM TO PURCHASE CONTRACT
« Reply #13 on: September 12, 2005, 08:17:14 pm »
I thought, maybe you would want to know what happened when I gave my buyer a printout of your replies.
1.  You all do this stuff all the time, but since you are on this site, you are being monitored, so you have to be careful about what you say, "or write".
2.  He thought I had brains enough to think on my own, and didn'y need a bunch of want-ta-bees telling me what to do.
3. I just messed up. and he wouldn't buy anything from me under any circumstances.
4.  The deal is off.  Call him when I grow up.

Obviously, he was mad.  I thought he might try to hit me or something like that.  But he left.  I can tell you I don't think he is going to let this go easily.  My nerves are shot.
I will keep you updated if anything else happens.
Bye and thank you foir all your advice..
will2

Offline $Cash$

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Re:ADDENDUM TO PURCHASE CONTRACT
« Reply #14 on: September 12, 2005, 08:44:58 pm »
will2,

Glad to meet you.

You did the right thing, which was avoiding becoming envolved in a fradulent transaction.

This person who approached you with this deal is not Mad he is "Scared", when he said these boards are montitored, what he was really saying is that he has done this before and should someone contact you then his name would come up with an investigation followed up on his activities.

You have the upper hand, any threats that he makes at this point, this creative investing commumity is aware of what happened, so for him to make any kind of unwanted move would only serve to bring him before the authorities rather rapidly.

Should you have any problem let one of the Moderators here know about it and it will be resolved quickly.

Relax, he is the one with the problem not you.

John $Cash$ Locke
"If people like you they'll listen to you, but if they trust you they'll do business with you."
"Training gives knowledge, knowledge gives confidence and confidence gives victory."

 




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