owner carried second

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

My parents are in the middle of a closing (long story)..3 weeks ago, buyers gave them an offer on their home, and my parents signed the contract. The asking price is a bit lower than the appraisal, because they wanted to sell quickly (appraisal is 148, asking 131).

My parents are very naive. The buyers had the contract written for selling price of 148 - my mom figured the buyers were getting a loan for 148 and using the difference between than and 131 for cosmetic improvements (new carpet, etc).

Actually, what they want to do is have my parents carry a second loan for the 17,000 difference. Apparently this is 'creative financing' - in other words, the buyers don't have money for down payment, they are aprpoved for the 131, 000 and they want my parents, ON PAPER, to agree to carry a second note. However, this deal is 'under the table', in that their lawyer pointed out that mom and dad can just 'forgive' the loan immediately (mom and dad would still receive the 131,000 they originally wanted, so what would it matter?)

My parents are really freaked out - they didn't realize exactly what was going on until the middle of closing, which they stopped. Now, they don't care about the extra money - they only want the 131 they originally asked for..but they are leary of doing something that might be 'fraud'. They are scared that if the buyers eventually default, that the lender might sue THEM (my parents) for fraud (as if my parents were in the 'deal' with the buyers, which they weren't).

Is this legal? The lender doesn't seem to care, and my parents have gotten two different opinions from two different attorneys - one said it was legal, the other said it wasn't....

Any ideas??

[HomeGuru]

Originally posted by jeanne17
What is the name of your state? What is the name of your state? Tennessee

My parents are in the middle of a closing (long story)..3 weeks ago, buyers gave them an offer on their home, and my parents signed the contract. The asking price is a bit lower than the appraisal, because they wanted to sell quickly (appraisal is 148, asking 131).

My parents are very naive. The buyers had the contract written for selling price of 148 - my mom figured the buyers were getting a loan for 148 and using the difference between than and 131 for cosmetic improvements (new carpet, etc).

Actually, what they want to do is have my parents carry a second loan for the 17,000 difference. Apparently this is 'creative financing' - in other words, the buyers don't have money for down payment, they are aprpoved for the 131, 000 and they want my parents, ON PAPER, to agree to carry a second note. However, this deal is 'under the table', in that their lawyer pointed out that mom and dad can just 'forgive' the loan immediately (mom and dad would still receive the 131,000 they originally wanted, so what would it matter?)

My parents are really freaked out - they didn't realize exactly what was going on until the middle of closing, which they stopped. Now, they don't care about the extra money - they only want the 131 they originally asked for..but they are leary of doing something that might be 'fraud'. They are scared that if the buyers eventually default, that the lender might sue THEM (my parents) for fraud (as if my parents were in the 'deal' with the buyers, which they weren't).

Is this legal? The lender doesn't seem to care, and my parents have gotten two different opinions from two different attorneys - one said it was legal, the other said it wasn't....

Any ideas??

**A: the scenario is fraudulent because the higher sales price is being used to increase the loan to value such that the Buyers will have to put no down or less down payment.
A lender would not agree to such a sham unless they were not given the true facts with respect to the second mortgage. If you want a another opinion, talk with a mortgage broker or loan officer at your nearest bank. You may even talk to someone at [url]www.fnma.gov[/url]