Seller Cash Back At Closing Illegal????
Hi. I'm about to make an offer on a 3 unit property which needs some work--mostly cosmetic. I've told the agent I'm working with that I want to make a higher offer with $25k back at settlement for repairs and closing costs. The mortgage broker/lenders I've been talking to told me to put the closing credit in an addendum, so that it's not on the HUD sheets. My agent says that we can't do that--it's illegal.
Is he right??? If so, how do buyers get credit at sale for repairs?
Please advise!
L in PA
I'd get a different mortgage company AND a different realtor. There is absolutely no problem getting a credit at settlement, except that some mortgage companies limit how much you can get back. (many have a 6%max) Even so, there is absolutely nothing illegal about writing an addendum and having the seller cut you a check after closing. Your only concern should be, that the property appraises at 25K more.
I recently tried this with a property in NJ and the mortgage company saw what I was doing (inflating the price) and I would swear that they made sure the appraisal didn't come in for more than the asking price. We had to contest to appraisal and finally won, but it was quite an ordeal.
Drop me an e-mail if you need more info - I'm also in PA.
Good luck on your offer!
I am going through the same thing. I am suppposed to get $50,000 back from the seller, but my title agent told me the bank will not allow me to walk from the closing with all that money. She suggests that I write up a separate agreement with the seller,, stating that he will give me $50,000 after closing. First of all, how do I know that this man will give me my money? ( even with the contract we signed) Second of all, the property belongs to the estate, as he is the executor of that estate. Would that ccause any problems? Does anyone have any ideas? Please respond to this board with any responses. I will not be able to view your PM
Thanks
Why would the mortgage company want to lend you an extra $25,000 of personal money - for you to do with whatever you want?? If you ran a mortgage company, would you let people walk away from the closing table with an undisclosed amount of your cash??
The loan you are taking out is not a personal loan and it is not a rehab or construction loan. So no ... the mortgage company does not expect you to walk away with pocket money. Some refis allow you to walk away with money, but there is full disclosure.
If you and the seller work out a personal agreement. You can have the money escrowed with instructions that it is to be released to you upon transfer of title.
Brenda
::gawk:: Not stating something on the HUD is TOTALLY illegal. And there is a HUGE problem with that. Is it done? Yes, is it legal? NO! You HAVE to disclose everything on the HUD you can't have a side agreement w/out including it on the HUD. "Side agreements" are not legal! I have done a deal like this as a Realtor, but I know it was illegal and only did it because of the specific situation of the buyer, I knew that he would not actually be a risk as a buyer(long story). Any Realtor knows this is not legal, if they go ahead and do it, they are doing it with the knowledge that it is not legal. I don't condone it, but I have done it. It's basically LYING to the mortgage company about where the money is going. Is that legal?
Asking for 2-5k at closing on a home for a few repairs that is disclosed is commonly done, and accepted. But $25k or $50k on a home as a side agreement not being disclosed on the HUG is called loan fraud.
Quote:
On 2004-05-21 14:55, tmpringle301 wrote:
I'd get a different mortgage company AND a different realtor. There is absolutely no problem getting a credit at settlement, except that some mortgage companies limit how much you can get back. (many have a 6%max) Even so, there is absolutely nothing illegal about writing an addendum and having the seller cut you a check after closing. Your only concern should be, that the property appraises at 25K more.
I recently tried this with a property in NJ and the mortgage company saw what I was doing (inflating the price) and I would swear that they made sure the appraisal didn't come in for more than the asking price. We had to contest to appraisal and finally won, but it was quite an ordeal.
Drop me an e-mail if you need more info - I'm also in PA.
Good luck on your offer!
[ Edited by Ruman on Date 06/09/2004 ]
As above, cash back that is not on the HUD is LOAN FRAUD, which is a felony. That is not to say that the seller cannot give you credit for repairs. Ask seller to place money is escorw accoutn, and let the money be disbursed as you complete the repairs, and present escrow agent with receipts.
I recently went through a deal and got 8K back at closing based on LTV. Personally I like credits because it limits out of pocket expenses. My broker says that "some lenders" have issues, just find one that doesn't.....
[addsig]
Thanks for all the replies. I think my agent was freaking out over nothing. I never would have tried to do it the "back door" way. I'm way too much of a stickler for that sort of thing. (I'd be the one person who'd get in trouble--just not worth it!)
I simply have and addendum specifying that the credits are slated for repairs, and my attorney will hold funds in escrow for disbursement. I've found 3 different lenders that had absolutely no problem with the addendum and I was able to shop the rates.
Thanks again,
Lynne
lynneann,
And, as you posted in the other topic on this issue, you intend you make sure that the HUD-1 states that there are addendums.