Can anyone give me examples how this is done? I know some people who are buying properties, in agreement with the seller, at $150K but putting $175K on the sales contract and at closing the seller is then writing a check for $25K to the buyer. Is this legal or is this fraud?
I am pretty sure having the seller write a check for no reason to give to the buyer is fraud. You can however have a check from the seller for repairs that need to be made to the house that the seller did not want to do. I believe that can be done.
Hi Abel,
I quickly read something once that stated exactly what you said. An investor was interested in a property that needed repairs, but instead of reducing his offer by the amount of repairs needed, he agreed to the original asking price but requested a credit from the seller for the amount of the repairs. This way the repairs can be made without becoming an out of pocket expense to the buyer. I guess you can look at it as if your including the repair cost in the 1st mortgage you take out on the property. I thought that was a pretty interesting way of getting a little bit of money to fix up your fixer upper.
In turns on how & why it’s done. If you are hiding something from the bank (e.g., cash payment made quietly after closing) or lying (e.g., cash payment for non-existent “repairs”), it’s fraud. Each questions turns on the facts…for example, in some cases, repair money is legitimate and in others, it is not.
John Hyre