I heard that you can structure a mortgage to pay out a repair allowance at closing by simply setting up your own repair company and having the payment go to them (which is actually you) and is stipulated on the addendum, which is signed by the seller.

My question is has anyone here ever done this? And what figure do you give the seller? In other words if I offer $300,000 for a house, with a $35,000 repair allowance to be paid out at closing, what is my actual offer to the seller? I’m taking out a $300,000 mortgage, but I’m really only giving the seller $265,000. Which amount to I offer to the realtor without having to give a long drawn out explanation (that they won’t understand anyway!) HELP!! Anyone.

Wouldn’t that be load fraud? Creating a fake company to collect funds that you are not supposed to have, in my opinion is fraud.

I just received an offer like this from a buyer on a property I have listed. Using your numbers, you would offer $300k for the house and have the repair allowance of $35k on the addendum. I have to tell you that as an agent, the buyer wanting the repair allowance on an addendum sent up red flags. Sometimes addendums don’t make it to the lender and that is fraud. No sale is worth me losing my license, so when I have a contract with addendums, I make sure eveyone has a copy (title company and lender).

Howdy Carlosgut:

This sounds like FRAUD. Your friend has done it ten times and could have ten counts of fraud against him by the FBI. You can add a repair allowance to contracts but make sure the money is spent on the property and the lender is aware. This used to be done all the time and I am guilty of selling a property this way myself about 10 years ago. I would never advertise it today on the internet. Them Tmen are everywhere.

Thanks a great deal! Message posted!