Cashback deals are done in many different ways and honestly each person views them differently. You have to learn to just be creative and you can post it on a Hud if your creative and have a motivated seller…
Deal my partner just put together for us on rehab… Seller bought home in April to rehab…he couldnt do it because of funds and other things. Selling house now. My partner is a GC so we are placing a mechanics lein on property for $80,000 for unpaid work. Since the seller had started the work, it will show unfinished when apprasier goes out. So when the loan is funded, the lein will have to be paid. Good thing is, yes lien is not technicially legit since we performed no work, but as long as seller allows lien, no one will question it. We just create paperwork to justify lien orginally. At close the lien gets paid to the GC who is my partner and we use those funds for the rehab and carry anyway…
Another way of doing cashback at close on Hud… And remember some condo conversions are now listing it on Huds as well when they give those decoratiing incentives, Spoke to one developer the other day on a deal. =The hud will show a payment to a company that will act as escrow agent. Its just listed as a 2nd lien holder on property for the sale to fly thru…they need to be paid in full…
Awesome, you’re committing fraud. Again, we’ve said before that you can illegally and fraudulently get money back at closing. EVERYONE knows that. The question was, and still is, can you do it legally? So far the answers have been overwhelmingly NO.
The questions has never been “what are the ways to illegally get money back at closing”…
I am buying my first home now. My mortgage broker says I am getting cash back at closing. We are not using a realtor and I am getting closing cost assistance. Should I assume the money I am getting is actually a loan for what is left over for my closing cost assistance?
The ONLY money you can get back at closing is money you have into the transaction already (POC closing items, Earnest Money) or an overgift from a blood relative (via gift of equity or gift check made out directly to the title co). If you are getting money back at closing other than that (i.e. the seller is willing to pay 6% closing costs in the contract but there are only 5% closing costs being charged) then you will ‘lose’ that money. That money will NOT make it’s way to you at the closing. Either the seller will just pay less than they had agreed to (leaving money on the table per se) or the broker will up fees to make a higher margin than they originally stated (this will have to make it’s way to a final TIL and GFE of course).
So DWF…you never get cashback on a real estate deal…I want you to explain something to me. I am not a Carlton Sheets fan…but how do those guys show those checks for money back at the close in the infomericals???
To you its fraud…to me its people being creative b/c of guidelines. it is like knowing how to get every tax write off possible that others do not get…
yrush, It’s not just fraud to DFW, it really is fraud!
Fraud- A deception deliberately practiced in order to secure unfair or unlawful gain.
It is nothing like tax write offs, it’s like lying to people to make it seem that you are owed more money then you truly are.
To get cash at closing you need an extremely flexible lender to over- finance the property. Or the fradulently way like your used to. In the short term you have a couple thousand extra dollars but in the long term you are now paying back your spending money with heavy interest.
but how do those guys show those checks for money back at the close in the infomericals????
Just because other people do it doesn’t mean that it’s not fraud.
The fact that you are omitting information and/or misrepresenting information makes it fraud. Tax writeoffs are not fraud, they are ALLOWED by law. What you are doing is NOT ALLOWED by law. It’s really not a complicated subject.
there are bridge loan companies that can, with the sellers permission, lend money for the downpayment and closing costs, and even to get cash at closing. but you pay 10% of the ammount you borrow from them as a fee. its like a bridge loan. one such company is called ARES (advanced realestate soultions). i know that the brokers at www.peilendingservices.com work with them. sorry, im not trying to advertise for them, but theyre the only ones ive worked through with ares.
The legal answer the seller can pay any commission desired to a realtor… I just spoke to a realtor in Northport, Fl and he told me, houses not listed at 7-8% commission are not even being showed right now. Many are giving out 9-10% commissions to sell fast plus…oh cash incentives…that dirty word DWF hates…
Now…if the realtor is kicking it back to you, then he is breaking some law, not sure which one…but it probably has to do more with his license then you going to jail if caught. But are you going to rat him out…I doubt it…
Are you a licensed broker? If so, then you if you can get a seller to pay you that much in commission, great. Is it legal? Answer is…yes it is. However, you may still have problems. First, unless you own your own firm, then you must be working for another company/BIC. They will want their cut of that commission check, so everything isn’t going to be yours. Second, you may want to review your state’s RE commission’s guidelines concerning RE agents. If you can get 15% commission great. However, if your average area commission is 6%, then it’s entirely possible that if the RE commission reviews your file that they may “charge” you with making “excessive profits.” While not illegal, it will have a cost to it, and may even threaten your license. Will it happen? Don’t know as I’m not familiar with your states RE commission rules.
yrush, you continuely amaze me. I really don’t know what’s more incredible, the sheer amount of bad information/advice that you post or the fact that you really do even half of the things that you post that you do. If you ever sit around and wonder why state after state after state are passing ever more restrictive laws concerning real estate investing, please look in the mirror. It’s the investors (and i do use the term lightly here) like you that seem to think that the current laws are merely “grey” areas that you can manipulate for your own benefits and your, “It’s not really breaking the law if you don’t get caught” attitudes. Your type is also why the term, “creative investing” is now held with such contempt. Creative originally meant some other type of financing besides conventional. But people like you that choose to go into the “grey”/illegal side of this business and choose to call it “creative” have ruined these avenues. I believe that before the start of the next decade, that true “creative” investing will be a thing of the past, and that buying any property as an “investment” will require one to jump through several legal hoops so much so that only a select few will actually be able to do it anymore. And we’ll all have you and yours to thank for it. Congrats.
Dealmaker,
There are still legal, ethical ways to get cash back at closing, though the amount may be an issue. The real question is what is the purpose? The late night guru approach of getting “spendable” cash doesn’t cut it in the real world.
Raj. Thanks for the feedback. I have a brokers license.
I bought the house I currently live in 8 years ago. My license was not hung with a real estate company. In the original offer I wrote that I was a licensed real estate broker, as I am required to disclose, and that I was to receive a 6% commission. The offer was accepted, I gave the escrow a copy of my license and at the close of escrow I received a check for 6% of the sales price. And I didn’t have to split the commission with a real estate company.
my question to you then is do you know if that was legal in your state or not?
Here, just because you have a real estate license doesn’t get you a commission. You either have to work for yourself (and be licensed as a “firm”) or you work for another firm under a licensed broker in charge.
I don’t know for a fact, whether it is legal or not. I’m in California. All documents were given to escrow and the commission appeared in the escrow instructions. As a matter of fact, my commission was paid directly through escrow and appeared on the settlement statement. I did not withhold any documents from the escrow company or the lender. The escrow company and the lender were both major companies. They must be aware of the laws.
I’ve never been in jail and have no plans to put myself in a situation where that may be possible. Now I will need to check to see if it is legal for a broker to receive a commision without being licensed as a firm.
Yet no one told me how Carlton sheets students do it. Someone must know. I mean they are on tv advertising it and showing the checks…
Now if anyone likes, i can probably email them about 30 preconstruction and condo converisions advertising these cashback incentives… Oh, not that I am pointing fingers…but I even know some high ranking polictians in Fl taking advantage of them also…
Illegal or not, speeding is illegal, having 2 beers in many states and driving is illegal…working on car, drinking beer and having the keys in the ingnition with radio on is a DUI in most state… You will have a tougher time beating that then most real estate situations…
I think its impossible to operate totally 100% in the law. It is why the term creative business was created. Its not I am convinced what I do is totally 100% legal, i never used the word it is legal.
Business owners… ever deal a lunch that was not a real business lunch or dinner on your taxes because you use your business cards. Take a personal trip but buy the tickets with your business AMEX…hey your doing it…and it is done alot…lets use the business AMEX for personal things… guys…hummmm…what is that…
I know we can go in circles all day long and no one will convince the other of anything but confrontation… I am merely doing something that is advertised daily in my area with all the condos and new homes… i guess itsa way of life here in REI… buying a home and getting cashback from the seller to cover rehab, but yet the sale price is low enough to add those prices in, since i never talk to an appraisal so its 100% legit apprasial and yet it saves me time and money to refi home or do an HELOC…if i dafault on the loan, the house still has equity for the bank…
I know what your all saying on here… And i know there are plenty doing what I am doing too…just to few are afraid to come forward. I am a straight shooter…
I guess setting up my LLC’s in NV and doing business in other states is illegal also to everyone on here… I guess since my holding company never pays taxees on sales, i broker the law, or that my Property mgmt co pays me an income of what it makes to not pay taxes is wrong too…i guess my whole way of thinking is wrong because i want to maximize my dollars… taking advantage of a developer paying 1st yrs HOA must be wrong too…giving free upgrades, etc…
I’m not sure of your point. Yes, most of what you just typed is breaking the law in some way or fashion. Are you saying people break the law so it’s ok for you to break the law?
Here’s the deal, if you break the law and don’t get caught, that’s on you. You may or may not ever get caught. That’s fine, it doesn’t bother me. You only really have a few things in this world that you have total control over. One of those things is your integrity. If your rationalize your dealings by the ‘well everyone else is doing it’ mentality then more power to you. My personal belief is that the long term effects on your character far outweigh any legal penalties anyway.
But whatever you do, do not say what you are doing is RIGHT. You may not get caught, you may be following the lead of alot of other people, but neither of those makes it right. The fact is, it’s fraud, it’s illegal, it’s deception for the sake of personal gain.
You can do it legally in the form of Credits and it has to be on the Final Settlement Statement that Escrow puts together. Just tell them what you’re offering the buyer as incentives and you’re giving seller credits. As long as everything is in writing and the lender is aware of the structure of the deal then it’s not illegal.
DWF… I know your an underwriter, but let me ask you this. Why is it that and underwriter will all a developer to pay another company besides the realtor and broker a fee off the HUD, with them knowing it is a mortgage incentive program where the buyer will be getting the money back…
Also what about all the investor that create silent 2nds out there… They is used alot to get 100% financing. Just bumping up the price and not recording the 2nd… You know this is done alot… double closing…well some say no, others say yes…
Why wouldn’t a developer be allowed to pay another company for the transaction? It’s not that anyone is trying to keep the capitalist system from working. What lenders are trying to do is to prevent collusion between the buyer, seller and other interested parties to artificially increase risk. If the lender knows for a fact that the borrower is getting money outside of closing then, provided they are securitizing the loan in a conforming mortgage backed security pool, they should reduce the sales price by the amount being given back. This is known as an ‘iducement to purchase’ and is specifically prohibited.
Again, the bottom line is that I’m not sure what you’re trying to point out. Are you trying to say that ‘things like this are done all the time’ so it’s ok? Is that really how you go about making your decisions? Do you really feel that if people do something that makes it ok?
I can’t understand how or why it’s difficult for you to just admit that it’s fraud. It is, there is no way to get around that. Is it done? Sure. If you feel it’s ok to commit fraud then so be it, but please, for the love of all things, stop trying to rationalize your way out of it. It’s a far more effective point of view to just say, it’s fraud, but I don’t care than it is to try to convince people it isn’t fraud.