I have a house for $345K. I have an investor that wants it. This is the email they sent me today:
W went ahead and did a quick drive by last night. My investor liked the area and thinks it has potential. We would like to go ahead and submit an offer. We will go ahead and give you the full $345,000 that you are asking. When you receive the offer, you are going to see that it is written for $410,000. This is to cover all closing costs and commissions so you don’t have to worry about it. You will see in the offer that you are to credit the buyer 3% closing costs, but this is to insure that the costs are covered from the amount the investor is borrowing. I hope you understand, if you have any questions please feel free to call or e-mail. Let me know a good fax number to send this to and if you need a cover page.
I want to sell the house of course, but should I be concerned about this? I’d appreciate the more experienced investors throwing in a nickel, darn the $0.02. Thank you!
He’s kicking in 16% of the purchase price to cover commisions and closing costs? Since when have the 2 cost THAT much? And since when has anyone not only paid full asking price but also offered to pay those fees with no arm twisting? Doesn’t sound like much of an investor to me. Hell I’ll go so far as to say it sounds like one of those Western Union scams from Nigeria. You know the type- We’ll send you a bank check/money order for much more than the item you are selling, you in turn cash it and wire us the funds, then the check bounces and you are left holding the bag and they have a whole bunch of new US $100 bills courtesy of you.
Thanks, rich. That is what it sounds like to me as well. I’ve never come up against this before, so I wanted to ask you all here what you thought the deal was and if I should contact any authority about it. I have another regular buyer for it anyway.
Of course he could be legit, but dumb. If there is some way for him to prove that he has the funds or financing in place from a US (this is key) bank you can still attempt to proceed (cautiously).
I would go with the normal buyer first, then if that falls through you can try to cautiously go with the other guy. Just don’t send any money anywhere, regardless of what he says.
THis should be your main concern. I think the guy is just asking you to inflate the price and pay the closing costs so he/she can get in for no money out of pocket. As long as it will really appraise for the new contract price you should be ok, as long as the seller contributions are on the Settlement statement and you don’t have to give him cash back under the table.
I flipped a house via double close to someone who bought it on the contract for more than the purchase price. There was the 3% closing costs that the Seller paid.
Basically, I wanted $70K for the house. The tax appraisal was $120K. The house needed about $20K in repairs. So the purchase price on the contract was about $94K, with an amendment to the contract that the Seller would provide a check at closing for about $24K in repairs. And the Seller would pay up to 3% closing costs.
The closing costs can eat you up! But what the people are offering has been done before.
Sounds like his “investor” is a hard money lender and he’s trying to get more out of the deal. I would consult a lawyer for this closing; $300 and piece of mind, seems fair to me.
Actually gets done quite a bit out here. The points get rolled into the mortgage (we were advised to do this by our Quicken Loans). As long as the house will appraise for the amount of the mortgage, their fine with it. That said, we were talking about 3 points ($360,000 X 3%), $10,800 not $65,000.
I think the issue is not the seller concession for the closing costs built into the mortgage, it’s the amount of that concession. I believe that you can’t do more than 6%.
The amount isn’t the issue, the issue is disclosure. If the purchase price is raised so that someone can get cash at closing, it MUST be disclosed. If the lender isn’t told (if it’s not on the settlement statement), that’s when you’re getting into mortgage fraud.
The realtor or person reping the investor, and the investor have the right idea but not the experiance to do this right. Yes it is illegal to have cash transfers outside of closing on a re transaction. Yes you can increase the sales price upto 6% to cover loan fee’s and closing costs.
But it sounds like some one wants cash at closing using conventional financing.
There is a way to do it legal but could be pierced if your intentions are not true. The purchase price could be increased to include the fact that you are going to lease back the property after closing for a predetermined cost and a predetermined length of time …regular tenant type lease. The overage of the purchase price less tax consequences will be the amount of the lease. So after closing you can pay for the lease from the sale of your property… and lets say you vacated the lease the day after and payed it in full… Legal but this puts you and buyer and agents in the gray area…and we all know gray area and greed kills… good luck.