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Yea, it is in the contract...the underwriters are seeing it and getting out their stamper marked "DENIED". If a buyer is getting a mortgage, that mortgage is for the house "as is". They are not lending on personal property (furniture, art work, lawn tractor, boat, etc.). There are also not lending on new wall paper, tile, landscaping, etc.
Now if something vital like a new septic sytstem or furnace is needed, we MIGHT be able to hold back seller funds in an escrow account to make the repairs depending on the deal. We would have to get an estimate from a contractor and hold back 1.5 times this amount to be held in escrow. Underwiters don't even like to see this, but we can usually get them to go along with it.
So are you saying that if an underwriter sees that we are giving 4000.00 cash back at the close to the buyer to do what ever they want - they will stamp the deal"DENIED"? I don't get it - why can't you give the buyer some cash - as a motivator in buying the house...
So are you saying that if an underwriter sees that we are giving 4000.00 cash back at the close to the buyer to do what ever they want - they will stamp the deal"DENIED"? I don't get it - why can't you give the buyer some cash - as a motivator in buying the house...
They are not willing to finance "motivation". You could drop the price of the house $4k or have the seller pay $4k in closing costs.
When they take the house back via foreclosure were is this $4k going to be?????? Could have gone for a vacation and that would be pretty hard for the lender to get back now wouldn't it?
We are here in AZ and are offering cash back at sale time with full offer of asking price
Why? dishwasher has gone? everyone wants the new appliances that are out there - and we can not afford to replace - so if the new home owner can use 5000.00 to make it "their home" - why not? Incentive selling, especially in this market - most of the buyers are using quite a bit of their funds if not all - and to have a few dollars to make the home have their touch why not?
I do agree the large amounts that are cash back - for just cash in their pockets are questionable transactions
While your agent may think this is ok...you need to run it by a lender. Are you all ready working with a lender to finance your new home once yours sells? If so, run this scenario by him.
So are you saying that if an underwriter sees that we are giving 4000.00 cash back at the close to the buyer to do what ever they want - they will stamp the deal"DENIED"? I don't get it - why can't you give the buyer some cash - as a motivator in buying the house...
Look at it from the lenders view. What you are saying is that the value of the house from a willing seller to a willing buyer is 4,000 less than the mortgage value. They finance only the willing participant value.
They are not willing to finance "motivation". You could drop the price of the house $4k or have the seller pay $4k in closing costs.
When they take the house back via foreclosure were is this $4k going to be?????? Could have gone for a vacation and that would be pretty hard for the lender to get back now wouldn't it?
Thanks for the response TimtheGuy.
If that's the case, how is cash back at closing for "motivation" happening so frequently? It's almost mainstream, and most realtors think it's perfectly fine to do. Are people not disclosing this to underwriting, or is underwriting going along with it to make the deal happen? It seems to be pretty much widespread all over the country, on existing and new homes.
What happens when the shoe drops and all these homes are overvalued because they include "motivations" in the sales price?
If that's the case, how is cash back at closing for "motivation" happening so frequently? It's almost mainstream, and most realtors think it's perfectly fine to do. Are people not disclosing this to underwriting, or is underwriting going along with it to make the deal happen? It seems to be pretty much widespread all over the country, on existing and new homes.
What happens when the shoe drops and all these homes are overvalued because they include "motivations" in the sales price?
I don't see any cash back at closing here in MN. " Most realtors think it's fine"....yea they don't know the financing end. The most common thing I see and we can make it work is a seperate bill of sale for the...painting above the fireplace, the lawn tractor and the patio set. We conveniently leave that seperate bill of sale for $1 out of the submitted underwriting file.
$4k carpet allowance...we tell them to get that out of the agreement and drop the price by $4k or change it to seller paid closing costs for $4k.
Keep in mind if the buyer is putting a lot of money down we could probably make it work. But if they are putting 20% or less then...NO.
Straight cash back at closing in the agreement....WE RUN...
Quote:
What happens when the shoe drops and all these homes are overvalued because they include "motivations" in the sales price
This current market is what happens...it's ugly...values drop...foreclosures sky rocket...and mortgage companies go under
I so agree with TimtheGuy here. Straight cash back at closing on a purchase....run away. I wouldn't touch it either. I'm not going to jail for someone else's greed, sorry. As for funds for major repairs needed to bring up the current value, ok. This does require funds to be held in an escrow account that came from the sellers proceeds to make the repairs. This usually also needs a "subject to" appraisal before closing and a final appraisal at time of payment for the repair, but all held back funds above and beyond that repair costs goes back to the seller, not the buyer.
ALL monies in conjunction with the sale of a property from one person to another needs to be disclosed on a HUD-1 Statement and no, buyers should not walk away from a closing table with cash in hand.
Ok, not to beat a dead horse but I just stumbled across this conversation while googling this same thing. This is our first home, so we have no experience with this at all. We have a contract for $4K below asking and the seller's relocation company is paying 3% closing, our financing is 100%. When we did our inspection there were a couple of repairs we requested, mostly some roof repairs. When the seller had it priced it came to about $2200. He's offering us a check in lieu of repairs. We've checked with the mortgage company (they were the first ones I called) and 2 different representatives from this huge, national, very financially solvent company said it was not a problem as long as the house appraised for the agreed upon price it was ok by them- they even said the seller could cut us a check before closing and they wouldn't care. The seller's relocation company is going to be asked as well since they're putting up closing costs. We'll also run it by the closing attorney. My question is: As long as *everyone* with a financial stake in the transaction says it's ok, is there a problem?
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