Is it legal for a Seller to rebate some of his profit to a buyer AFTER closing? Assuming the home is purchased at or below market rate, the appraisal is legitimate and there's no funny business with the loan, can the Seller cut a check to the Buyer the next day?
Thanks!
2007-02-22 05:49:32 · 4 answers · asked by Anonymous in Business & Finance ➔ Renting & Real Estate
Thanks for the answers...much appreciated! It's interesting, because there's no shortage of websites that offer a cash rebate, from either the seller, or the Realtor, after closing. Sometimes they claim it on the HUD as a consulting fee, sometimes it looks like it's just coming as a check in the mail after closing.
My Red Flag is that it might be loan fraud, but it seems odd that someone would be advertising a "prosecutable" offense online, with their contact information and everything.
I did come across one scenario where the seller bought the property from the bank originally, for about 60k, though it comp'd out @ 90k.
Then, the Buyer bought it for 83k, still 7k under MV, leaving the Seller with a 23k profit. Then, the Seller pre-paid a 1 yr lease @ MR (about 10k), provided a tenant and took a mgmnt fee, with the balance going to the Buyer each month.
I don't know. Seems very clever...and that's my question. Is it TOO clever? Any additional thoughts??
2007-02-22 06:52:15 · update #1
No it is not legal.
It is defrauding the lender. Lenders make their risk assessment based on the total value of the property vs. their loan amount. If you bought the property for 200k and got 10k back, then you really only bought it for 190k. The appraisal is an estimate of market value - but the sale SETS the market value. The home is WORTH 190k, but the lender is in the dark because the buyer AND seller CONSPIRED TO DEFRAUD them by keeping important facts out of the loan file. That is the only reason to exchange money outside of a transaction - to keep someone from finding out.
Ask yourself this - what else do you not know about this transaction? Liars lie and cheaters cheat. If the people in the transaction with you are trying to make a couple extra bucks by putting one over on the lender, what would prevent them from sticking it to you as well? WOULD YOU KNOW?
Make it a firm rule to only do business with honest and forthright people. It may cost an extra buck or two now, but you will end up ahead in the long run.
2007-02-22 06:00:17 · answer #1 · answered by sdmike 5 · 2⤊ 0⤋
No, it's illegal. Any money back from the seller that isn't shown directly on the settlement statement and approved by the lender is considered "under the table". Basically, it's fraud.
The value of your home, for lending purposes, is the lesser of the purchase price or appraised value. You will basically be lying, in writing, about the true purchase price of that home, since you're getting money back from it.
Buy it at the real reduced price. Get an equity loan afterwards for the extra cash.
2007-02-22 06:14:58 · answer #2 · answered by Yanswersmonitorsarenazis 5 · 0⤊ 0⤋
It is not legal. The p&s says that this is the accurate selling price disclosed to the bank
If you are buying it for less than the contract says to get a kick back, the bank can call the loan in in full if they find out.
Do not do this.
2007-02-22 06:21:14 · answer #3 · answered by frankie b 5 · 0⤊ 0⤋
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2007-02-22 20:52:05 · answer #4 · answered by Praveen K 2 · 0⤊ 0⤋