is it legal? - Posted by mel

import · October 2, 2003, 10:42pm

Posted by Eric on October 08, 2003 at 17:28:41:

It is possible. There are lenders that allow for the seller to pay a buyers pre-pays and reserves, which normally a buyer has to come to table with even if they are getting “100%” financing. How you get money back though is to have the seller pay for repairs. You can structure the deal so that all your closing costs are paid by the seller and then have them throw in additional funds to pay for a new roof, carpet, etc. I’m sure you’ve heard of a carpet allowance, and such. Most lenders don’t like to see stuff like that, but there are some who allow it.

import · October 2, 2003, 10:42pm

Posted by mel on October 02, 2003 at 22:42:25:

After going through the entire Carelton Sheet’s course, I was under the impression that buyers can get cash back at closing. However, so far, I have yet to find a broker who will even consider discussing the idea and one of them told me that it is illegal…
is that true?
If it is legal are there certain terms I have to follow?
I could use any kind of advice from anyone who has attained cash at closing.
Look forward to hearing from you.

import · October 6, 2003, 2:14am

Re: is it legal? - Posted by Chireen

Posted by Chireen on October 06, 2003 at 02:14:17:

I’d be interested to hear some experience on this as well. I’ve been in this business a lot of years, and have not yet known anyone who actually got money back at closing. Well, I take that back, I have seen it happen, but not like they say in the Carlton Sheets description. I’ll explain in the last part of this message.

However, I can answer one of your questions. I’m not an attorney, and this isn’t legal advice, this is just from my experience. Is it illegal to get money back at closing? Getting money back at closing isn’t illegal. How you do it could be. It’s up to the Lender. If they know you are getting money back, and they don’t care, then you can get money back. If you have to hide the fact you get money back, then yes, it could be illegal…well, or against the Lender’s terms. Depending on the situation, it could be fraud on your part towards the Lender, which would be illegal.

Here’s the only situation so far that I’ve seen the Buyer get money back at closing (more money than he put into the house). The Buyer gets a 100% conventional loan, and the Seller has agreed to pay all closing costs. Lender agrees to not hold escrows (to NOT escrow for taxes and insurance in your home payment). So your home payment just consists of your Principal, Interest, and mortgage insurance if any. Since Seller agreed to pay all closing costs, the Buyer’s cost is $0 on page 2 of the HUD-1 (settlement statement) at closing. And let’s say you close 0n October 6th, 2003. On page 1 of the HUD-1, the Title Company has to charge the Seller for his proration of Property Taxes from Jan. 1st through Oct 6th, 2003. So let’s say that’s $2,500 for the Seller’s portion of the property taxes. Property taxes aren’t due until the end of the year, and the Lender isn’t setting up an escrow, so that $2,500 comes back to the Buyer at closing. So the Buyer walks away from closing with $2,500 in his pocket, but in Dec. when the taxes are due, the Buyer must pay the full year of taxes for 2003 of let’s say $3,000. So in actuality, the Buyer did walk away with money from closing, but it really was money that ultimately belonged to the property taxing authorities.

To my knowledge, this isn’t what they are talking about when they talk about walking away with money at closing in one of those seminars or Carlton Sheets info. And again, I’d love to hear from anyone who really did leave closing with money as I’ve not known it to happen either (other than what I described above).

Look forward to hearing from some of you out there.
Chireen