Offering cash to buyer at closing?

[peiklk]

What is the name of your state?What is the name of your state? Georgia

Our realtor said his broker said this couldn't be done, but logically I cannot see any reason why... What we want to do is offer up to $5,000 cash back at closing. They can apply some of this to closing costs or take the money and run to Florida or buy a big screen TV, paint the house, re-carpet, whatever.

We need something to make our house stand out from the crowd right now.

We've been on for a little over two weeks and one phone call and NO SHOWINGS.

We worked a deal with our realtor who is in our destination city for a lower commission if we did a lot of the work. I have a website at [url]http://www.peidev.com/4250?ol=faf[/url] if anyone wants to look. We're doing most of the marketing ourselves too. (we're only paying them 1.5% and 4% to the buyer's agent).

So... the bottom line of all this. Is this legal? I looked at the HUD RESPA info and it doesn't seem like Section 8 applies to the seller. It's my money after closing, why can't I commit to giving some to the buyer?

Anyone hear of this done before or can point me to where I can solidly tell if this is legal or not?

[PghREA]

Originally Posted by peiklk

What is the name of your state?What is the name of your state? Georgia

Our realtor said his broker said this couldn't be done, but logically I cannot see any reason why... What we want to do is offer up to $5,000 cash back at closing. They can apply some of this to closing costs or take the money and run to Florida or buy a big screen TV, paint the house, re-carpet, whatever.

We need something to make our house stand out from the crowd right now.

We've been on for a little over two weeks and one phone call and NO SHOWINGS.

We worked a deal with our realtor who is in our destination city for a lower commission if we did a lot of the work. I have a website at [url]http://www.peidev.com/4250[/url] if anyone wants to look. We're doing most of the marketing ourselves too. (we're only paying them 1.5% and 4% to the buyer's agent).

So... the bottom line of all this. Is this legal? I looked at the HUD RESPA info and it doesn't seem like Section 8 applies to the seller. It's my money after closing, why can't I commit to giving some to the buyer?

Anyone hear of this done before or can point me to where I can solidly tell if this is legal or not?

Why don't you just lower the price by $5,000. Lenders do not like to see see deals made outside of closing. In my state offering cash to the buyer is a no-no. However, seller's assistance in closing costs is acceptable but there are guidelines that must be followed.

[peiklk]

Originally Posted by PghREA

Why don't you just lower the price by $5,000. Lenders do not like to see see deals made outside of closing. In my state offering cash to the buyer is a no-no. However, seller's assistance in closing costs is acceptable but there are guidelines that must be followed.

We prefer to make it a deal AT closing. While lowering the price has the same effect mathematically, it does NOT have the same effect psychologically. Instead of competing with 50 homes at the current price, we'd be competing with 50 homes at the lower price. Still nothing to separate us from the pack.

[nextwife]

This may be a problem under most financing programs. There are prohibitions on any sort of "seller giving buyer part of down payment" contracts. Cash back is a way of giving the buyer part of their DP BACK at closing - the underwriting guidelines require that the money for downstroke either be a gift (from relatives) or from the buyers themselves. The DP money must be verified and shown to have been on account, Verification of source of funnds is done to be CERTAIN no DPP was given by seller/broker to get the deal done.

There are good reasons for these rules, which have to do with 1980's abuses of low downpayment loan programs, and high foreclosure rates in certain neighborhoods following such practices. Underwriting was tightened up.

And if, by chance, you end up with an actual cash buyer, they won't need cash back, and would simply knock it off the price.

Sellers CAN, however, help with closing costs, or actually do certain work (such as replace carpet) for the buyers.

[peiklk]

Originally Posted by nextwife

This may be a problem under most financing programs. There are prohibitions on any sort of "seller giving buyer part of down payment" contracts. Cash back is a way of giving the buyer part of their DP BACK at closing - the underwriting guidelines require that the money for downstroke either be a gift (from relatives) or from the buyers themselves. The DP money must be verified and shown to have been on account, Verification of source of funnds is done to be CERTAIN no DPP was given by seller/broker to get the deal done.

There are good reasons for these rules, which have to do with 1980's abuses of low downpayment loan programs, and high foreclosure rates in certain neighborhoods following such practices. Underwriting was tightened up.

And if, by chance, you end up with an actual cash buyer, they won't need cash back, and would simply knock it off the price.

Sellers CAN, however, help with closing costs, or actually do certain work (such as replace carpet) for the buyers.

I don't understand.

They qualify before this money.
They verify income before this money.
They verify bank accounts before this money.
They verify DP before this money.

This money is AFTER everything is said and done. I don't understand what the problem is legally.

[PghREA]

Originally Posted by peiklk

I don't understand.

They qualify before this money.
They verify income before this money.
They verify bank accounts before this money.
They verify DP before this money.

This money is AFTER everything is said and done. I don't understand what the problem is legally.

Argue it all you want - that's the rules and until you get to be in charge of the banking industry, it will remain that way.

[peiklk]

Originally Posted by PghREA

Argue it all you want - that's the rules and until you get to be in charge of the banking industry, it will remain that way.

Where did I argue? I simply said I don't understand. Which I don't.

And frankly, no one has yet pointed to anything saying that giving someone cash AFTER closing is illegal.

[PghREA]

One of the questions asked at settlement is "Are there any deals outside of this closing." If you were giving cash to the buyer after closing and said "no" you would be lying. That's considered illegal IMO. Lender's are expecting the answer to be "no".

[peiklk]

Originally Posted by PghREA

One of the questions asked at settlement is "Are there any deals outside of this closing." If you were giving cash to the buyer after closing and said "no" you would be lying. That's considered illegal IMO. Lender's are expecting the answer to be "no".

Bingo!

Thank you very much. That's a solid answer.