Best Way To Suck Cash Out At Closing??????
Hi all,
I am trying to figure out how to suck cash out of a purchase at closing. Everyone knows the easy way (agreeing on a price and then raising it to appraised value and have the seller pay you the difference after closing) however I understand that this method is considered fraud! At the closing you have to sign a paper stating that there are no side deals, basically for the protection of the lender.
So I tried to figure out a legal and efficient way. This is what I came up with:
1. Form an LLC as an inspection company and have the state in the contract that the seller will pay a certain (my) company a fee (however much I want out) to do an inspection on the property.
2. Write a second mortgage on their property and file a lien. Whether in my name, my wife's, an LLC or whatever. Then the title company would cut me a check at closing.
What I would like is to suck cash out w/out commiting a crime, and also have the title company cut me a check not the sellers. I am sure this is possible, I am just having trouble coming up with a feasable way any discussion or suggestions would be helpful. Thanks a lot! 
I don't know how much cash you're wanting. I just set up a deal where I made my bid on a property at 5K over the selling price and asked 5K from the seller for repairs. I can easily come up with 5K worth of stuff to do to the property, but the finance co. didn't even ask. Now, I do plan to spend 1K on the property, but I knew I would have to put 4K down so this way I get my down payment back plus the money I need. I don't see why this couldn't work anywhere. As long as, at the time of closing, you had the intent to spend that much on repairs.
That's just one way. I'm sure someone else will have a better idea. I'm pretty sure that in the Carlton Sheets program, he tells you how. I've got it ordered but haven't listened to it yet.
Good luck,
Ronnie
Thanks for the reply mussetter!
When you say you asked 5k from the seller what do you mean? Did you do it as a side deal where you told them you would give this price: if after closing they would give you 5k for repairs? or ?
like I said thanks for the reply!
at first glance, it looks like if you own that LLC and the money ends up in your hands, it's still "fraud" because you have an interest in the property and an interest in the money you will receive through a company you own. ENRON did a lot of deals like this. The only way you can do something like this, legally (consult a lawyer) is to have a third party put a lien on the property for "justifiable" work. That person could be your cousin. If your cousin later on decides to give you money, it's his business. As long as genuine work has been done on the property for which a lien was placed. However, beware that if you were investigaged, this could be construed as a "Scheme" to defraud the lender through a "third" party and it's loan fraud. The charges are severe and so are the penalties. It involves wire fraud, conspiracy against the United States, loan fraud, perjury and other nice things that could land you in jail for a long time! Scary isn't it? All the nice ways to make money seem to be made illegal so you don't get rich!!! Big corporations do all kinds of tricks, like setting up separate companies, separate businesses, and running all kinds of money through them, assets, etc. One other thing that has bec ome illegal is "seller seconds" where the seller "forgives" the note after the deal is done!
Another one that just hit me!
Does anyone know if there is a limit on how much a listing agent can charge?
What I am thinking is: if you had a real estate license could you just find a FSBO and explain to them that you would like to buy their house in your spouses name, or your LLC's name and act as their agent and charge a 10%-20% commission? I really don't see anything illegal about it as long as there is no government set limit on how much you can charge. As long as the house appraises out the title company should cut you a check at the closing.
Any suggestions or comments?
Chances are they reason for them selling the "FSBO" way is to try and save on the commission of a an agent. Even if you were to charge them 10-20% commission, why would someone do that when they could just get a regular agent at around 6-7%??
I am saying: If you find a FSBO and the house is worth 120k and you negotiate a purchase price of 100k, why couldn't you then tell them the plan as acting as their agent and charging a 20% commission, you would of course raise the price back up to 120k to cover the expense. Then if you were putting 10% down plus closing costs you would get it all back plus a little.
Think it could work?
That's totally crazy. Who would pay 20% commission? Not me. They would rather go with licensed real estate agents for total of 6% or something.
I did my cash out with 10k for a property that really needed the fix up. I pocketed the cash to start off with, but over two-three months, I eventually used the money for fix ups.
Real Estate agents don't (or at least aren't suppose to) charge more for commission than their brokers allow. You can go lower, but higher is not generally permitted. Besides, you're still asking the seller to do something that is frowned upon by lenders, and considered fraud by many. Why should a seller do that for you, a stranger? Most lenders have a limit on how much money a buyer can take out, and that money is usually for closing costs or some repairs. Most lenders won't even approve a house that is not ready to live in. You'd need a different kind of loan -- a rehab loan.
Yes I think the easy way is to inflate the sales price and get back the money for cosmetic repairs example house selling for 140000 you offer 150000 you ask for 9,000 dollar credit for repairs you come up with the 1,000 dollar difference you can also mix this with subject to seller paying 3% of closing cost
Thank you all for your suggestions and comments. I guess the best is to go with the credit for repairs.
If anyone else has any ideas please post!
This is just a different take on what someone described earlier:
1) Have an organization (LLC, 10-99, or any "entity" that offers a service) setup. The services can include your "speciality" such as home inspections, telecom installation & diagnosticts, Compter network diagnosticts, equipment configuration etc.
2) Structure the deal "subject 2" the above listed service
3) As long as the property can bear the costs (i.e.appraisal by an INDEPENDANT entity -- if they have any connection to the LLC or yourself you will be in trouble) you should be able to make money (i.e. cash out) for the service provided.
Glenn
I am not a lawyer -- but I'm in the early stages of working on a deal right now using something similar. If someone knows how this can cause troubles please let me know! This seems to be "OK" in Az -- not sure about other states.
Thank you Glennl,
I spoke to a friend here in Colorado about this subject. And this is what he did:
A lady called him for a refinance, but she couldn't qualify because of bad credit and too many missed payments. Her house was going to be foreclosed. So my buddy told her he would buy it from her and lease it back to her with an option to buy it back in 2 years. She owed 100k and the house was worth 150k. So they wrote up a contract for 150k. He then submitted a 50k invoice to the title company under his llc's name, the invoice was for property consulting.
After the closing the title company sent his llc a check. He is going to keep the money until she buys the house back for 130k in 2 years. When she buys it back he will still owe 20k over the sales price so he will lose 20k out of his cash back. Her lease payment does not cover the high loan payments so he will also have to cover the rest with his cash back. But he said he should net about 25k off the deal. He did have to bring 10% down to the closing, plus closing costs but he got it all back.
If anyone knows whether or not this is legal would you please comment. Like I said at the beginning of this post I would like to suck cash out without doing anything illegal.
And Glennl please let us know how your deal comes out!!