Forgivable second mortgage question

[rsmith456]

I live in Florida and purchased a property that is a fixer upper. My intensions were to fix the property up and resell. My problem is when I purchased the property it came with tenants and now they want to purchase the property. I’m ok with this but they don’t have any credit and the mortgage broker they have wants me to do a forgivable second mortgage (he’s also referred it as a sweat equity loan) of 10% to be paid back at closing. Three weeks ago I got my real estate sales associate license (inactive at this time) and I’m hearing that this type of loan is a crime. I’ve also read that the real estate associate can be held accountable and my license could be at risk. I’ve asked the mortgage broker if this 10% would be in writing on the contract and he said ‘no’. This smells fishy to me but is this illegal? Thank you for any response!

[HomeGuru]

Originally Posted by rsmith456

I live in Florida and purchased a property that is a fixer upper. My intensions were to fix the property up and resell. My problem is when I purchased the property it came with tenants and now they want to purchase the property. I’m ok with this but they don’t have any credit

**A: then DO NOT sell to them unles they have cash.

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and the mortgage broker they have wants me to do a forgivable second mortgage (he’s also referred it as a sweat equity loan) of 10% to be paid back at closing.


**A: can you say SCAM.

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Three weeks ago I got my real estate sales associate license (inactive at this time) and I’m hearing that this type of loan is a crime.

**A: no, that type of loan is not a crime.

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I’ve also read that the real estate associate can be held accountable and my license could be at risk.

**A: that part is true is a license holder did not follow the laws.
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I’ve asked the mortgage broker if this 10% would be in writing on the contract and he said ‘no’.


**A: well a big DOH! That's the first red flag to a scam.

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This smells fishy to me but is this illegal? Thank you for any response!

**A: it now depends. If you are talking about a fake apprased value and a kickback to the Buyer, yes.

[realtor404]

These types of loans are illegal if given to a buyer by the seller of that property. It is considered a "gift" because it is forgivable. Unfortunately, any gift given by the seller must be given thru a non-profit agency (such as Nehemiah). If it is not filtered thru a non-profit agency (which is monitored by HUD), it is considered illegal.