Posted by Ronald * Starr(in No CA) on July 09, 2003 at 16:44:03:
Matt--------
He wants to get a quick sale. There are a lot more potential buyers for a no-downpayment house than for a $15K-downpayment house.
Good InvestingRon Starr******
135K 120K switcheroo ? - Posted by Matt
Posted by Matt on July 09, 2003 at 12:18:15:
Made a call to someone who was selling a house for
let’s say $ 1000 month - by owner.
(I’ll change names and amounts here to keep this anonymous…)
Got the person on the phone. He is an investor who
had done a rehab on this home. He told me I could buy for
120K from him, but he would “officially” be selling for 135K to me - and I could tell that to the bank. He has a friend and an appraisal for 135K also - so it looks like
there is 15K equity in the property.
Then, after closing - he would “give” me 15K back in cash
when deal was done. Didn’t go into much more than this, but my alarm bells went off. Said he has done multiple deals
like this - and banks don’t care.
Not sure of all the details - and I’m not considering this, but was just wondering what people thought is going on here - fraud - or just fudging numbers within the law?
Seems to me there would be legitimate profit from the rehab
itself, and then selling with payments, L/O etc.
Thoughts?
Matt
Re: 135K 120K switcheroo ? - Posted by Craig
Posted by Craig on July 09, 2003 at 22:27:44:
I disagree with some of the comments. This deal is OK and if done properly perfectly legal and ethical. The terms of the give back must be expressed in the purchase agreement. While not all lenders will agree to such a large give back, some will. The give back should occur at closing–not after–and be included in the Settlement Statement.
Another question you should be asking, though, is why give anything away? If the property will appraise that much higher, why not raise your asking price and look for a different buyer?
Re: 135K 120K switcheroo ? - Posted by James (FL)
Posted by James (FL) on July 09, 2003 at 12:37:07:
Matt,
Is he your friend? If not, walk away. There is nothing that you can do after the closing to ensure he will give you the $15K. Also, if you try to collect it, you can both be charged with loan fraud, because most loans do not allow the buyer to walk away from closing with that amount of cash. If this is a loan like that, and you try to collect $15K he said he would give you, you have committed loan fraud by not disclosing this to your bank. I have heard of things like this when it was family members involved, and they wanted to give the cash back to do renovations etc, but never on an investment property. If he wants to give you money, have him give you a promisary note, you can record against one of his other properties as a lien. Then, when this property is purchased from him, if he gives you the money, issue him a satisfaction of lien for the promissary note. If he does not repay you, you will eventually get it if he EVER sells the property you filed a lien against. Also, make sure you comply with any lending laws in your state. To me none of this would be worth it. The rest is up to you.
Just my take on it.
James
thx James - Re: 135K 120K switcheroo ? - Posted by Matt
Posted by Matt on July 09, 2003 at 13:02:30:
Thanks James. No - not my friend - just an investor
I found selling a property in a really unusual way
:–0
I agree with you - and wouldn’t touch this personally.
Just wondering why if he did a rehab, and there is
already profit in the deal for him - that he would
go through all of this stuff?
Matt