Equity Cash out at close of purchase - Posted by Digby

Posted by Rich-CA on June 20, 2007 at 09:05:58:

Your interpretation needs to be the right one in order for there to be a reason for this discussion. I have not asked for cash back as a buyer, but there are now more restrictions on how much seller paid closing costs there can be and I have found that where my negotiated contract exceeds this, I have to go through and move expenses from the buyer to the seller on a line item basis just to be able to get the total we agreed on, and then amend the contract to match.

I also usually set up a repair escrow, which is sort of cash back, but the checks are to the person doing the work for me that I hand out as progress payments while the work is going on. I find they are more willing to let it go is your hands don’t actually touch the cash, but there are ways to structure the same effect.

Equity Cash out at close of purchase - Posted by Digby

Posted by Digby on June 07, 2007 at 12:25:30:

I’ve got a client who wants to purchase a home that is over 100k under market value. Purchase price: $349,900 & 4 model match comps all at over $550k.

She is an investor and wants to structure the deal such that at the close of escrow, she collect that equity in the form of cash.

I’m confident that the property will legitimatly appraise at over $550k.

Obviously, I don’t want to do anything questionable to complete the deal and get her that money, but am not opposed to creative “out of the box” ideas.

Does anyone have any suggestions with how I can pull this off? I don’t want to lose the business, but I want to protect myself and my client in the process. Thanks in advance for any thoughts…

Re: Equity Cash out at close of purchase - Posted by Rich-CA

Posted by Rich-CA on June 08, 2007 at 20:39:29:

I’m confused as to why the sales prices does not just include the equity she wants out. Then after everything is paid off, the escrow agent will just wire the funds in to the designated accounts. There is and needs to be nothing tricky about this.

Unless she’s looking for an under the table payment that she can then not report for tax purposes. That’s illegal so I would not propose anything to help there.

Re: Equity Cash out at close of purchase - Posted by John Corey

Posted by John Corey on June 19, 2007 at 12:45:33:

Rich,

You wrote: “I’m confused as to why the sales prices does not just
include the equity she wants out. Then after everything is paid off, the
escrow agent will just wire the funds in to the designated accounts.
There is and needs to be nothing tricky about this.”

Are you assuming that cash back to the buyer will work if it is declared
on the HUD? What do you expect the lender to think of a cash back
deal?

John Corey

Re: Equity Cash out at close of purchase - Posted by Rich-CA

Posted by Rich-CA on June 19, 2007 at 17:32:04:

Unless it a short sale or the cash out is going to the buyer, of course it can be reflected on the HUD-1. The only scenarios I can think of where a lender might have any reason to onbject is where they are losing money due them, such as a short sale, or the money is a kickback (loaded word, I know, but accurately reflects how some lenders have told me they feel about these things) to the buyer.

In a straight sale, excess proceeds always go to the seller. If its a short or some other situation where the bank isn’t getting what they believe is their due, then its not a straight forward sale and I would expect problems.

So, either I missed something about the lender taking a reduction on the payoff, or there is no reason the seller can’t get whatever is left over.

Re: Equity Cash out at close of purchase - Posted by John Corey

Posted by John Corey on June 20, 2007 at 03:56:27:

Rich,

I believe we are talking about cash back at close to the buyer. Lenders
will not work with such deals generally. They will just reset down the
purchase price.

Manipulating the figures to do a cash back without the lender noticing
is mortgage fraud.

Cash to the seller is expected and not what we are talking about if I
read the initial question correctly.

I suspect that we have some confusion going on in this thread. Maybe
it is me.

John Corey