"allowances"
I am having trouble with a deal and could use some help. I am purchasing a single family home to rent out and am negotiating the price. the asking price is 54k and I had a home inspection done and it needs a little work(about 6k). So I told my broker and realtor that I would like to offer 60k and have the seller pay me 6k after closing to do the repairs. I want the money myself so I can distribute it accordingly. The broker and agent arent sure if I can do that because I am getting cash after closing. I dont understand what the big deal is? If the seller agrees to it what is the problem as long as the house appraises at 60k? I think the broker and the agent are not familiar with creative buying so should I just tell them to be quiet and write the offer? or am I doing something wrong?
Is what you are proposing wrong?
You could get cash back for repairs as long as the contract is written up correctly.. As long as the bank is aware what is going on there shouldn't be a problem. This money would have to be paid to you by check from the closing attorney.
Lori
[addsig]
On a seperate addendum, both parties agree to have the seller credit whomever the buyer designates, the sum of $6K. Use someone with a different last name than yours.
Don't give the addendum to the lender.
The $6K will be shown on the sellers closing papers as a cost to him just like his loan payoff and repair expenses.
Thank you both for the great advice. unfortunately I have already submitted the contract and the bank is requiring the 6k to be held in esrcrow and be given ONLY to whoever does the repairs and not me personally. This is ok I guess since I really need to do some repairs on the house.but it looks like if there is any money left I cant take it for myself, unless the closing attorney will let me...we shall see. thanks
Lenders do not like cash back. They are fine with repairs if the work is done and the work was needed. It helps improve the their security in the deal.
Cash back starts people down the slippery slope towards fraud. I say this in that people start cutting side deals which the lender is not told about. Then there is some question as to what is the real value. If the lender takes the home back and discovers that there was a side agreement they could come back after you. Not likely but legally the option exists rather then they just get the property.
Escrow of the funds while the work is being completed is entirely fine if the intent of the funds is to get the repairs completed. If you do the work yourself they will likely be open to paying for the materials but not paying for your labor. The lender would prefer the work to be done by a licensed contractor so they know it is done to code.
John
John,
I understand the point you are trying to make and I agree about not wanting to have fraud in my deal. But, the real problem here is appraisers. they conviently appraise a property at whatever the asking price is. they dont ever do real comps and check on other houses to find out the REAL value of a property. the house I am buying is 1760square feet 4 bed 2 bath in pretty good condition for 54k. the house right next door is 2 bed 1 bath 1000 square feet for 54k. you and I both know that when an appraiser comes along he will say both are valued at 54k. does that seem fair to you? is that fraud? no actually thats just a flat out lie! In reality if the appraiser comes back and says to my lender that my house is really worth 60-65k then I could get cash back no problem. so because appraising is such a joke people have to cut side deals to get cash out of a property.