Cash back at closing? - Posted by Owen

Posted by lukeNC on May 31, 2006 at 12:14:02:

The financing lender must be in full awareness of what you are doing here…if they are and are OK with it, go right ahead.

Very rarely will a lender let you take money back from a purchase money closing in that amount UNLESS it is a multifamily deal or some other commercial deal, and even then it is rare.

if the underlying lender doesnt know, or if you are trying to hide the fact that you are taking money back, its a fraudulent transaction with huge and horrible consequences.

I’ve seen this done before though: you buy the home at the discount price then do a cash-out refi a week or so later. Lender knows exactly what’s going and has no problem.

Why the difference? I dont know…but, he who has the gold makes the rules.

Cash back at closing? - Posted by Owen

Posted by Owen on May 31, 2006 at 10:50:39:

I have some questions about receiving cash back from the seller at closing…

Let’s say I have a property where the sellers agree to a $60K purchase price. The property needs $25K or so in repairs. Let’s assume that its current appraised value is $85K.

Would it be possible/legal for me to write up the contract at $85K, bring in new financing for $85K at closing, and have the sellers cut me a check for $25K? I have heard of “repair allowances” or “carpet allowances” from sellers, but I was not sure on exactly how it worked. If it is indeed possible to do, what are the tax implications? If you write it in the purchase agreement that the seller will give you money back at closing, will the lender still do the loan for $85K- since they will be aware that you are “overfinancing”?

Your insight is appreciated- please let me know if I need to provide further clarification.