Creative Financing - IS IT LEGIT ????

I’m selling a home in Florida for well below market price. I found a buyer who wants to buy at my appraised price. However, he wants cashback from my original listing price and the appraised price (equaling almost $80K ). Other than documenting the HUD, can this deal work if I were to give him a check and get something in writing???
I want to make sure I won’t be liable for paying any taxes on the captial gains. (no lender will approve that much amt on the HUD)

Thanks…any help would be greatly appreciated.

This would be illegal if done behind the scenes without the lender’s knowledge and I don’t know of any lenders who will allow the buyer to receive cash back at closing on the HUD.

Thanks for the feedback.

$80,000 cash back is pretty slim to fraud in the lender’s eyes.IMO There’s a few creative ways to leverage the buyer’s cash positioning but $80K is skating on thin ice.IMHO

I am in the process of selling a home as well. I got an offer from someone who works for a mortgage company. I am trying to sell the property quickly so, I was asking 190,000 for the property. The house comps out around 205,000. The buyer wants to show the purchase price of the sale @ 205,000. While having another agreement with me to give her a gift equity of 15,000 at closing to net me 190,000. I am new to this type of financing. Is this how other no down payment deals are handled? What does the transactions look like on the Settlement statement? If the purchase price is 205,000 then wouldn’t that be my basis in terms of calculating profit on the sale?

yes, you would be taxed on the 205K

Generally, the only lenders that will allow cash back at closing are hard money lenders(higher rates,points, and fees).

The program is available with the lender having full knowledge of the cash back transaction. Of course what comes into play the answer to why the cash back and what will it be used for. I

f the buyer is willing to pay the higher fees, the loan can generally be done based on appraised value, not just the purchase price.

I hope this helps. ;D

I have been investing in rehabs for awhile with 2 other partners…one guy find deals with realtor and on his own and his partner is th GC…I am dealing with the financing end in getting loans in my name…

All our deals involve cashback at closing…Current deal I am closing on May 26th is agreed purchase price $440K, contract price $505K, cashback from seller at close $65K, financing 100%…how does this work…seperate contract with the seller which only the escrow agent will see (mortgage broker doesnt want to know about it) where they are directed to deposit $65k from the proceeds of the loan.
Is it on the HUD…nope…Does it affect taxes…NOPE…check with your CPA…it can be considered a gift if i am correct, but remember…if single and owned home for over 2yrs…first 250K is tax free so if you have a seller who has been living there for 10yrs, will not even make 250K (500K if married) then they do not have to worry…
Now also is a realtor is involved they will know about the transaction so the commission will still be based on the 440K in my situation…the 65K is for rehab and holding cost of 6months and the insurance policy and taxes…

Hey market is slow…i need 15days to rehab and still have 6months to sell before i have to worry about a loss…

Hi Yrush2000,

Thanks for your feedback. But i’ve only owed this home for two months, it’s a brand new construction, no realtors are involved, and I file joint. If the cashback is considered a gift, I’m pretty sure you’re taxed on it. Also b/c it’s not a rehabbed, it’s difficult to say it needs alot of improvements. I found out attorneys and most accountants say it’s fraud b/c lenders do not approve of any kickbacks.

Here is some advice for you… Call some local investors in your area or where the home is being sold and ask them how they handle there cashback deals whether they are giving it back or recieving it… Ask them if they have a form they use for it…ask them for any cpa they can talk to about this method…

Creative financing is totally legal I will tell you. How do you think 99% of the investors make it these days. Remember investors thinking outside the box are successful, those inside the box are not. We use mortgage brokers because they think outside the box, bankers only look inside the box…
The worlds greatest inventions happen b/c we think outside the box…find a need and provide a solution for it…Same in REI…I have a property to sell, I need the property, I want you to give me money back when I buy it…Find the solution to this method and your RICH…

Thanks yrush2000,

I’ll look into it.