Guys, I am new to this real estate investing, and I am on the vege of buying my first home down here in the New Orleans area. I would appreciate it if somebody will educate me on how to get CASH BAck AT CLOSING. Please furnish me with different creative ways to come about this. Thank you, and God bless.
can somebody help me out please?
If you are approved for more than the purchase price you can have the seller write a check at closing for repairs. ex. PP $500k, loan amount $600k, seller writes check at closing for $100k for necessary repairs to property. This is one way I have used in the past
Thank you very much.
But why can’t I give the seller $500k and keep the remaining 100k? Why must I ask the seller to write that check for necessary repairs?
I think I wrote a book on that Hmmmm yeah I did! Anyway the reason they need to write you the check is if they do not it will show on the HUD and the bank has a hard time giving you money to buy a house! I always make it a seperate addendum to the contract!
What do you m ean by making it a separate addendum to the contract?
And what if the seller gives you a fake check? How am I supposed to pull this through to make sure that the seller does not swindle me?
Again, thank you guys for your answers.
Knowing that this is all just ahypothetical ;). Well the title company or the attorney can disperse the funds, the bank funding the loan will wire the money to one of their accounts or they can get a certified check at closing. They will then write you a check at closing for the purpose of repairs. I don’t even want to get into the legalities of getting a check back at closing! Not to mention why would the seller sign a hud-1 stating he received $500k in full and pay capital gains tax on that amount when he only received $400K. I don’t know too many banks that are going to give you 100% financing on $500k just because you want to walk away with a check for $100k at closing. Since the money has to be accounted for, just let the owner give you back a check at closing for those needed repairs. Also put in the addendum to the contract that you are to get that money back for repairs that the owner isn’t willing to do.
Thank you, and God bless you.
I am going to speak on NON-HUD properties.
While selling a property, I had an investor ask me to raise the price on paper, so the lender would pay more and then write him a check for the difference. It was for rehabing the property… UMM NO !!! Can we say Lender Fraud ?
This is what I did and walked away with a check with zero money down.
I placed the property under contract and cleaned it up. It did need some major rehabing but I waited to touch it. I then placed a FSBO add and signs on major streets. I had the property sold in 24 hrs.
because I have an awsome title CO, they closed the deal in 5 days. First closing with my buyer, an hour later with my seller. Then handed me a check for the difference. ( open title close)
The title was warrenty deeded to me, therefore I did take ownership of the property for a short time ( very short) . The money from my buyer thus paying my seller.
Granted the check was not huge, but hey $5000 is nothing to sneeze at for a couple hours work!
I didn’t even clean the property up, I paid my boys to do it, placing their pay in their accounts. Just after that was homecoming and both boys went. The money to pay for it was in the account. Money I would have had to fork out anyway. :o
The guy that bought it rehabs, then rents to low income families from his dad’s church for a very fair rate. ( I know that shouldn’t matter)
but it was a win-win-win-win deal MY kind of deal
I wasn’t even talking about a hud property I said a Hud-1, it’s a form used at closings. I purchased my 1st property in Brooklyn, NY nearly 7 years ago in my early mid-20’s for $130k. I got it in contract and got approved for a loan for $180 based on an FMV of $225k. The property did need work and I had closing costs. I renovated using some of the money I got back at closing and my own income. I did a great and expensive job because I was going to live there. Today my house has an FMV $900k - 1 mil. The seller didn’t have to increase the price of the contract or commit any fraud nor did I. I wasn’t doing a flip and $5k wouldn’t have done much for me, but if that is what you are looking for then thats good for you otherwise I see nothing wrong with getting cash back at closing if work needs to be done or for other purposes. That is why alot of people have chosen to invest in R.E. I got money back at closing, still had equity in my property and the market value has increased substantially. I now have 5 additional properties that I purchased all cash, which I allways give credit to that 1st purchase. The amount I pay for mtge is cheaper than the average persons rent in NYC. By the summer my home will be free and clear of a mtge and my investment properties will have a mtge, (not all of them). The rental income from them are $7.5k/month. Not to offend anyone I’ve worked in R.E. since 1994 and I believe I know what I am doing and when I don’t have a clue I am not afraid to ask. So good luck Finidi.
Oh and by the way some banks do allow for cash back at closing for rehab of the property, as long as it is added in the contract in the addendum. I just sold a property where they allowed the seller to give back at closing a check for over $200k. They did require a list of the repairs at closing to go in the file and they did request that the seller put it in the contract added to the sales price. This was so they did not have to do a construction loan. The buyer was willing to do it and the loan officer structured it this way. Each state does have their own laws and it is beneficial to know what you can legally do where ever you are investing. Also even at that price the property was still well below market value.
Ahh I think what you said in one of your posts (forgot what thread it was in but…) shed some light on my credit union’s ‘Investment Property Loan Program’. They say, “Cash out allowed”.
Can borrow up to 85% of the value of the property to payoff 1st mortgages, 2nd mortgages, consolidate bills or purchase other property.
Borrower must have excellent credit
Term will only be for 120, 180, 240 or 360 months
LTV (Loan to Value) 85%
So I am now thinking that they will loan me 85% of the ARV of the house and if I can neogtiate a price lower than that number then I can get that cash back at closing.
The only other caveat to this program is they say that I must have, “10% Down investment fee required”. So really I have to have the 10% of the loan amount to put down yet they will turn around and give it back to me at closing? Sounds wierd, but need to ask more questions of the loan officer.
Oh and also I like the fact that the rate with this type of loan is only 6.25% and 6.5% depending on a 15 or 30 year note.
Oooppss and last but not least the condition of the property has to be AVERAGE or higher so no 20k junker properties. She had told me something like they use fannie mae or something so they don’t allow houses that are not occupiable…sp?
Excellent credit is a 700+ fico score from all 3 agencies. I have never had it but hope to have it some day soon.
I have been to 2 free seminars but I never take the classes or buy the books or tapes because they cost to much, so I agree with you there. I do have C Sheets tapes that I got from a friend.
You can get cash back with a 571 middle fico. You can do a no money down deal and get cash back. There are several ways to structure a deal so that you walk away with cash and they don’t have to be illegal. (although I have seen investors do crazy things in my line of work!)
I have seen some properties in great condition on the hud list. One in NYC went for $895k 2 years ago, that was the highest bid and they won a very beautiful house that many wanted and in pretty good condition.
Also don’t count out the hard money lenders because they can be very helpful in these situations. If you get the right DEAL you can really start out succesfully in REI. I wish I had all this information when I did my first purchase, I would have kept going instead of waiting 6 years to get started in investing.
Whoa there Eve,
No need to have a vicious tone! I simply offered an example of MY experience.
I did not assume or in any way imply that fraud was committed, again, I stated my experience based upon my attorneys advice.
If I have in anyway offended you while relaying my experiences, I apologize. We are all here to learn and share.
I never get offended by what someone replies in regards to anything I post. All I am doing is explaining techniques that I know have worked for me but I am in NY and every state has their own rules. My mistake if I thought you believed I was referring to hud properties. I am also here to learn and share. Also there were no implied tones given or taken. All the advice given on this post is great and beneficial, it is upto to the individual what she or he will do.
Be nice now folks - this is a learning forum - Cash back it a tricky subject!
All have some great comments on this subject.
All advise if founded on fact is of great value - keep in mind that if one has done and investment strategy and all goes well does not mean it is correct or proper in every state - as an investor one should know their own state laws to be a successful investor.
Cash back deals are ok if the lender is aware of the transaction and approves, if you have to be creative in its use to cover something up it’s called lender fraud.
You can face:
You will face credit issues
Possible Attorney General involvement
Possible County grand jury involvement
You could be charged with theft
You could be charged with racketeering
You could be charged with credit fraud
You could be charged with tax fraud
You could face fines
You could face jail time
Most everyone has heard it before — if a deal sounds too good to be true, it probably is
A number of red flags wave in the ill wind of mortgage fraud includes:
You are offered a fee to use your name and credit information to obtain a mortgage.
You are encouraged to include false information on a loan application.
You are asked to leave signature lines or other important areas of a loan application blank.
The amount of the mortgage is higher than the value of the property.
The mortgage has gone through a series of refinancing and in each instance the amount of the mortgage has increased.
Not knowing the information would be used to commit mortgage fraud will not necessarily get a straw buyer off the hook with the law.
“Ignorance of the law is no excuse”
“There could be consequences even if (the straw buyer) is unaware of the deal.”
I look forward to learning from your post. I am sure as I read you will impart a lot of knowlege through your experience.
See ya on the boards.
This will be my last post for the evening maybe for the remainder of the month. I am a very big skeptic, very pessimistic. But I have come to learn that there are deals that are too good to be true, but they exist. Being creative doesn’t mean that you are covering something up. One of Carlton Sheets tapes he says that if one lender won’t do what you need done, then you go to the next lender until you find one that will give you what you want or close to it. Be creative with owner financing or use hard money but never buy a property that doesn’t work for whatever reason. I can list 1000 properties that were done no money down with cash back at closing. One of the investors I have worked for started in NYC less than 10 years ago, purchased a mansion a few years ago using a mortgage and now his property is free and clear of a mortgage. I never once witnessed any fraud, but then again everyone isn’t going to be 100% truthful about how they got rich in RE ;). (DT, RW, CS)
Sounds like you have made transactions that have been a WIN-WIN! Way to go.
If one makes honest transaction - discloses what is necessary - success comes!
I love creative real estate transactions more so than just getting a loan and making a purchase (has become vary boring to me).
I love using trust, lease options, contract for deed’s, subject 2’s, and on and on. The creative side of real estate investing allows us to simply help more people.
A WIN-WIN for all parties in a transaction makes it a success!
Eve and co
I thank you guys for the knowledge and experiences that you guys have shared with me. This is a great forum full of selfless and kind people. Thank you, and God bless you all