I’m sure you all have a trick or two regarding getting or giving cash back when the deal closes.
or,
Seller to make mortgage payment of $1000 on August 1, 2006 and $1000 on September 1, 2006.
Choice of $1000 cash or a $1000 Home Depot Gift card to buyer of property after closing.
Is there a way to legally get or give more than $1000 after the deal closes? Like $10,000 or $20,000?
Or if not legally, what is the safest way?
much depends on the type of financing you come to the table with. tell me the problem and I’ll see if I (or someone else) can offer a solution. the simple answer is yes, buyer can walk with cash from the transaction. now what’s the problem?
-h
I am selling a rental property. The property is in Temecula, CA and the market is very soft. The property is worth $365,000 to $370,000.
If the buyer comes in with a 90% or even a 95% loan and I can offer the buyer $10,000 back when the deal closes my property may be more appealing than some of the others.
Is there a scenario whereby this can be done legally?
If not legally, then how can it be done with minimum risk of me going to jail?
<<If not legally, then how can it be done with minimum risk of me going to jail?>>
So, for the right price, your integrity is for sale??
What kind of a sleazy question is that?
Keith
I just want to know what some of the investors out there do in this type of scenario.
I think they do jail time.
How about this situation:
I agree with the seller to pay $250,000 for the property.
Since I have a brokers license I then ask him to sell me the property for $277,800 and pay me a 10% sales commission.
He still gets his $250,000 and I get $27,780 as a sales commission.
Is this a legal way to get cash when the deal closes?
Will the lender have a problem with this because the commission is higher than 6%?
you will never get a straight answer on this. I have posed this ? a dozen times on this board and nobody has ever come forward w/ a step by step scenario on how this can be done. You will not find a lender in the country that will give you as a buyer cash back on a purchase loan. You may find a small bank that will spot you some rehab funds case by case and if you have excellent credit and the property is being obtained at a discount but they are not going to over extend themselves on it. And even then they will generally hold the funds in escrow and make disbursements to contractors.
But to just get cash back on the equity…no way! Now you can refi the house the day after closing and or take out a heloc if you have the credit…there are plenty of lenders that dont have title seasoning requirements…
While it is illegal to hike the price of a property above and beyond… well for instance. You agree to purchase a house from me for $200,000. You come to me and say what if I give you $250,000 for the home and you give me $50,000 cash back at closing. We agree. Well, if you and I fill out those numbers on the 1003 form, we’ve just violated title 18 section 1001 (don’t quote me on those numbers) which ties itself to the Uniform Residential Loan Application. We have provided fraudulant numbers as it relates to the property in question.
For a slightly different view, take a look at:
The legal way to give money back at closing is to pay the closing cost for the buyer. Depending on the state your selling will determine the percentage you can contribute towards closing cost. I live in Fl, so thats 3% of the sale price…A 300K purchase means seller can contribute upto $9,000 in closing cost. This is technically a form of cashback since the buyer is not outlaying this money out of pocket or in a loan…
Now the…ummm…e------legal way…this is how i do most of my rehab homes… If you do not reveal to the mortgage broker your plans to get money back from the seller then he is not breaking any laws himself, thus he is protected. You can add a clause to the sale contract at the very end of it (the mortgage broker does not get this sheet in the sale contract) and it states the title company is to pay you $30,000 out of the sellers proceeds from the closing. Only people to see this are the buyer, seller, realtor and title company. This is something done with conventional financing when your looking to rehab and float the home. Of course you have to have 2 agreed upon prices. The orginally price which the realtors will get commissioned off and the sale price with how much you get back … Most realtors wont take a commission of that since its what is closing the deal…
Will you goto jail…well do not know anyone in jail for it…there really are no mortgage police out there…How many people buy OO when its really NOO…
The state doesn’t dictate the % the seller can contribute, the lender does based on the loan program. If the seller agrees to pay $9000 in closing costs but there are only say, $6000 actual costs, the buyer is either ‘leaving money on the table’ by not getting the full benefits of the transaction they negotiated OR they renegotiate the deal (usually lowering sales price accordingly). The bottom line is that the ‘extra’ $3000 would not be given to the buyer at closing in the form of cash.
Again, the point is that there are many ways to get cash back at closing. The question was posed is if there is a legal way to do this (i.e. without committing fraud in the process) and as of yet I haven’t seen any post a real example of it being done legally.
you also, generally wont find a title comany that will fund a loan and cut checks based on the last page of the sales contract…They are duty bound by law to fund as per the HUD Settlement statement and that genrally has to be approved by the lender before they will wire the funds to the title company. I’m not saying you can’t do it if you have crooked title/escrow company, but it’s illegal.
Now, if the seller chooses to give you money out of his proceeds/pocket when he gets his check then so be it…no harm there, but the title company can’t facilitate this transaction.
that’s between the buyer/seller after closing…funding etc…
Like I said before, you cant get cash back at closing via lender proceeds on the loan for general use. (small town 1 branch bank may be the exception…I dont for sure, I’ve not seen one that will do this)
and seller contributions isn’t considered cash back…you’re just getting reduced closing costs…that don’t count b/c you keep your money in your pocket that you already had…(would have been used for closing costs)…We’re talking about new money that you didn’t have before…
Will you goto jail...well do not know anyone in jail for it..there really are no mortgage police out there..How many people buy OO when its really NOO....
While it may be true that there are no mortgage police, Lenders have really started to tighten their requirements. There has been an extremely large increase in the amount of defaulted properties, due in part to slimy investors, mortgage brokers, etc.,which creates a large amount of purchase opportunities good for the investor.
However, if that same investor is going to need financing it is going to be more difficult to obtain it due to the aforementioned issues.
I have had several clients tell me that they have had a visit from someone representing their lender a few weeks after they have closed. Probably as close as you will get to a true mortgage “policeman”.
As many have stated in this forum what you are really selling is your integrity.
What is your price?
Seems I made some enemies on my post…
DWF…In Florida the seller can only contribute upto 3% of the closing cost, no matter what lender you use. Now lenders decide based on loan product if the seller can contribute, but if i am using a bank that allows upto 6%, still in florida i can only get 3% from the seller…its the law here…
Sky…The method of getting cashback from title company is something I and may friends have done before using many different title companies. its like the the double close…Another thing banks don;t like and many title companies will say its illegal and can’t or wont do them…Yet it is still done…
That’s not true. My company has several reps in FL that we u/w loans for and there is no state mandated law that prevents the seller from contributing more than 3% for CC’s and Prepaids. It’s determined by loan program. I challenge you to produce a document that proves otherwise.
No one is saying that these ‘cash back at closing’ deals aren’t done. Everyone knows they are done. The original question was ‘are they done legally’ and no one has yet to show how they are done legally. People are murdered every day, no one questions that, but to explain how/when it’s done legally is a different matter.
you can ask for cash from the seller at closing for carpet, repairs and so on. you could also ask the seller to pay the tax prorations.
It’s simple. Will the lender allow it?
BY LAW, the entire deal must be on the HUD-1 (closing statement). If part of the deal is not on the HUD-1, then you are breaking the law. People are in prison for this stuff. Others only lose their good reputation.
What about a broker/principal getting commission back from the seller?
If the seller is a FSBO, will the lender have a problem if the seller pays a 10% or 15% commission?