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From how I understand it, it's perfectly legal as long as: - Everything is disclosed on the HUD statement - the house appraises for at least the sale price or higher - the concessions are taken off of the "net sale price" of the home on the HUD statement
But the more people I talk to about this, the more confusion there seems to be.
As well there should be. Fraud requires fraud. There are no neat indicators out of escrow. Disclosure of fraud in no way makes it legal. It is just disclosed fraud. I expect much fraud is properly disclosed in the HUD.
We have an employee who bought a house last year. He was thrilled that he would be getting cash back at closing. He was getting his deposit back.
But what he didnt and still does not realize is that he is paying for that deposit for 30 years. And at a very high interest. The price of the house was $335,000, he borrowed 106% ; so if my memory is correct, his mortgage is $350,000. He does not have PMI ; because one loan is for 80%, theother is for 26% or so. One loan is 8%, other is 10%.
I am just waiting for to come crying to me that he is in foreclosure. His credit is terrible. His mortgage is over $3000 per month. Which is 3 times what his rent was. His mortgage broker told him he could refinance in a year and cut the payment. But what she didnt forsee, was that realestate prices in NY stopped climbing and have dipped.
Oh well, he should have listened to me years ago when he could have bought a house for around $100,000.
When I sold my single family, which had been a rental and my tenants had burned out the boiler for the basedboard hot water heat, I gave the amount that I had an estimate to replace the boiler, which was $3,400.
I had the estimate there.
My house was on the market for less than 24 hours before I had an offer for more than I was asking. (I think the Realtor had advised a very low price because I had to sell quickly.)
I still had to discount the price for other things on the building inspection.
But the cash back to replace the boiler was great.
As I understand it, the buyer used the money not only to replace the boiler, but relocate it... so the money was a good idea because it was flexible.
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
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.
Now cash deal...go ahead and go whatever you want.
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if it helps to sell - why not?
