Pros: Best way to structure cash back at closing? - Posted by chris

Real Estate Investing
#1

Posted by Rich-CA on August 10, 2007 at 15:38:13:

I normally have my contractors submit bids on invoices. Then I submit the selected bid to escrow for a pair of checks to be cut (50% to start, 50% on completion). I usually have them cut to my property management company who then pays the contractor.

The issue is if the check goes to the buyer, it effectively reduces the down payment since the HUD-1 matches up the incoming and outgoing funds and nets out each party’s contributions. I have found lenders look at the net outflow and if it goes back to the buyer, its a kickback.

#2

Pros: Best way to structure cash back at closing? - Posted by chris

Posted by chris on August 10, 2007 at 11:19:44:

I’m trying to brainstorm the best way to structure a contract to help a buyer of one of our properties get $10k cash back at closing for repairs. NOT CONCESSIONS AGAINST DOWN PAYMENT. Cash.

One way is to take a $10k commission from my brokerage and give the $10k back to buyer after closing, but this is illegal I think and would cost me taxes on that $10k.

Anyway, some one out there have a crafty way of structuring the contract to get cash back? Maybe using a small 2nd somehow? I don’t know. I’m drawing a blank today.

PP is $159,900.

Thanks,

Chris

#3

Best way to structure cash back at closing? - Posted by Natalie-VA

Posted by Natalie-VA on August 12, 2007 at 13:14:56:

Your buyer’s lender would be the one to answer this question. Most will allow at least a 3% concession from the seller to the buyer. Most lenders would prefer to see this as “closing cost assistance” instead of “repair allowance”.

–Natalie