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Is this routinely done? We got this offer on some property of ours:
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Response from _______ see below:"Because we planning to build a new home on property only to see it working if he would take a straight cash deal for $155,000. I have 230,000 in a 401k, so is max can offer and still build house. Would take me 30 days to get loan against 401k and other legal things finished to fund."
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This buyer has been flaky from the get-go, so I'm wondering if this is even a logical scenario. Besides the bad grammar.
The gamer in the quote reminds me of the email scams that are going around. If the buyers second language is English he is way ahead of me in language ability, but if it is not, it is a minus sign to me.
In general I think most 401k plans limit loans to 50% of the balance. Thus 115,000. This means he has 40,000 in cash now that he is putting in the project.
If you want to sell at the 155,000 price ask for the 40,000 down payment now and the agreement should state that the deposit is forfeited to you if he does not close in 60 days. I would set closing from 35 days from the signing of the agreements but give him a grace period if something goes wrong.
If you are not sure that the deal will close than state that you can continue to sell the property and he has the right of first refusal if you get a higher price. If you do sell to someone else then he should get his 40,000 back.
Bad grammar would make me suspect a scam. Anyone who has a 401k with that much in it would have to have been working in the US for quite some time, thus should have better English.
rjm1cc has good advice. I would add to ask buyer for a copy of his most recent 401k statement to prove he has the funds.
Most 401k's CAP the loan at $50,000. Even if his allows a bit more, there's NO WAY they will allow him to get a $155k loan when he only has $230k in his 401k.
He's pulling something, OR he's deluded.
Send him on his way, because even if he's not scamming you, he'll string you along and likely never close.
CASH is CASH and he doesn't have it. ALL other offers are contingent!
My only comment on this is the receiver of the email should report it to the police. I don't know who else to report it to, but I believe the police are trying to crack down on these scammers.
Most 401k's CAP the loan at $50,000. Even if his allows a bit more, there's NO WAY they will allow him to get a $155k loan when he only has $230k in his 401k.
He's pulling something, OR he's deluded.
Send him on his way, because even if he's not scamming you, he'll string you along and likely never close.
CASH is CASH and he doesn't have it. ALL other offers are contingent!
NOT TRUE! All 401k's are different. There is usually a cap on how much you can borrow against them, but to take money to buy property/residence it's pretty high I think 50%, but that would still leave the buyer needing more cash.
OP, is this the same buyer that you have been working with? The same one that wanted YOU to finance him originally? I would ask for proof or 401k funds and PROOF he can take out the $155k or $115k and cash for the rest! ALSO ask for at least $10K earnest money at time of signing a contract. That way you'll know he's really serious!
IF it's true, then have your lawyer draw up the documents, if you are fine with that sales price! I'd give him 40 days to close.
On a side note.....who cares about his grammar. Money is what talks and your lawyer will draw up the contract anyway!
I don't think it's wise at any age to borrow from a 401k.
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