Is cash back legal??

Question

I am trying to buy a condo from a Real Estate company and they are offering me $50 thousand cash back. Is this legal?
The condo is going for $700,000 and they will give me $50,000 back at the close of escrow
I understand that it is my $50,000 that they are giving me, but this sounds a little fishy.
Should I be concerned, and is this deal on the level?
Thank you for your time,
Geoff

Answer 1

Cash back is legal. Usually it is not more than 2 or 3 %.

The condo has to appraise for the 700,000 although you are only paying 650,000 for it.

This may be a scheme where as they up their comps so that they get the next people to pay 710,000 instead of 660,000. To that end this is deceptive. Similiar kinds of things are done with new construction. If the condo is not worth the 700,00 then you will have some serious problems if you spend that 50k and try to sell your condo that isnlt worth the mortgage you have on it.

Tread carefully.

Answer 2

I spoke to real estate attorney about this. In NY it is illegal. However they could give you up to 6% for closing costs that would in turn be paid back in a higher asking price. It is possible to get money back through a promissory note and get it notarized to ensure the seller will give your money back. If it is a verbal agreement the seller could potentially walk away with the extra cash. Also, why would you want cash back? You will have a higher mortgage amount unless it was to flip the condo; I could see it making more sense.

Answer 3

It is legal (in some states) if the lender is fully aware of the deal. Unless you are putting a significant amount down, I do not see a legitimate lender funding such a deal. And if you are putting a significant amount of money down it kind of defeats the purpose.

Today with declining property values lenders want to be sure they are protected. Essentially, you taking 50k from closing, tells them that property is only worth 650k and they are lending 700k(Less downpayment) . Therefore, they are not very well protected (depending on your down payment) in the case of a default.

Once again, if it is not fully disclosed it is mortgage fraud and there can be some serious ramifications. Be careful.

Answer 4

Be careful that this is also disclosed to your lender. The lender will accept a value that is the lower of cost or value. That will be $650,000, not the $700,000. If you fail to disclose this, or it is not reflected on the sale contract, you could be guilty of bank fraud.

Answer 5

Like Rico said, its perfectly legit if it is disclosed to all parties. You'll know if its disclosed if it is written into your contract.

To be honest, on a property of that value, I would be looking for a larger amount of cash back. You must be in coastal area for that price and if that's so, the market must be slow where you are.

Answer 6

that's criminal gentle for all expenditures public and private. So then, Burger King could settle for money, as a substitute of bartering with you by accepting eggs or chickens out of your farm, or something. besides the undeniable fact that, agencies legally do no longer could settle for large denomination expenditures. it is likewise a pragmatic count number as nicely as a secure practices count number. there is not any regulation in desire of your argument that because of the fact money has the fact "criminal gentle for all expenditures public or inner maximum" that this someway obligates Burger King or all of us else to settle for large denomination expenditures.

Answer 7

It's all legal if it's in the contract and disclosed to all parties including the lender. If they are trying to hide it from the lender and the lender finds out, you could be held liable and your loan all due and payable.

Answer 8

Yes

Answer 9

It's legal in some states but not in others. I know from first-hand experience that it is very illegal in TX.