Tags |
|
|
Links |
|
|
Answers - Seller Contributions and Cash After Close - One is Illegal!
In the past few years in the real estate market, the Buyers have finally gotten the upper hand.
And the one thing buyers are demanding is money! Money in repairs, money in upgrades, money in closing costs, and sometimes, money in their pocket.
The most surprising thing in my mortgage business, to me, has always been how little money people have saved.
Most loan programs simply require lenders to verify the borrower has two month’s worth of house payments in cash reserves when they close escrow. The majority of people I deal with have trouble meeting that condition.
Forget down payments. The
And the one thing buyers are demanding is money! Money in repairs, money in upgrades, money in closing costs, and sometimes, money in their pocket.
The most surprising thing in my mortgage business, to me, has always been how little money people have saved.
Most loan programs simply require lenders to verify the borrower has two month’s worth of house payments in cash reserves when they close escrow. The majority of people I deal with have trouble meeting that condition.
Forget down payments. The
According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product
y don’t have it and that’s why 100% financing is so popular. But how
about the 2%-3% in closing costs required to purchase a home? They don’t have that either.
Enter seller contributions.
A seller contribution is when the seller of a home puts up some or all of the money needed toward the buyer’s closing costs. Seller contributions can be negotiated at the time of a home purchase by having the seller pay closing costs rather than a reduction of the home sales price.
Sometimes you can do a combination of both.
A lot of people are creditworthy of having a mortgage but they just don’t have a l
A seller contribution is when the seller of a home puts up some or all of the money needed toward the buyer’s closing costs. Seller contributions can be negotiated at the time of a home purchase by having the seller pay closing costs rather than a reduction of the home sales price.
Sometimes you can do a combination of both.
A lot of people are creditworthy of having a mortgage but they just don’t have a l
; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.
Examples of combination products may in
Examples of combination products may in
t of money in
the bank. In these cases, seller contributions can mean the difference between a sale and no
sale.
A Seller contribution is very easy to do. You simply disclose it to the lender. In most cases, these contributions range from 3%-6% of the purchase price. Some 100% financing programs now allow seller contributions up to 6%. It used to be capped at 3%.
Ever wonder how the homebuilder offers to make the buyer’s payment for a year? They use the seller contribution to make these payments out of escrow. If you buy a $300,000 home and the builder is allowed a 3% contribution or $9,00
A Seller contribution is very easy to do. You simply disclose it to the lender. In most cases, these contributions range from 3%-6% of the purchase price. Some 100% financing programs now allow seller contributions up to 6%. It used to be capped at 3%.
Ever wonder how the homebuilder offers to make the buyer’s payment for a year? They use the seller contribution to make these payments out of escrow. If you buy a $300,000 home and the builder is allowed a 3% contribution or $9,00
lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.
0 and your payment is $1,500 per month, there are
your six months in payments.
Sometimes seller-contributed closing costs can help the borrower get a better interest rate by buying it down, making the home easier to qualify for.
Ever wonder how a homebuilder can offer 4.750% interest rates when the market is at 6.000%?
They use seller contributions to buy down rate. Figure that every .250% of rate buy-down costs 1% in points or a loan discount fee. If the rate today is 6.000% and you want to buy it down to 4.750% that would cost 5 points in discount fees. You still have 1% left over for clo
Sometimes seller-contributed closing costs can help the borrower get a better interest rate by buying it down, making the home easier to qualify for.
Ever wonder how a homebuilder can offer 4.750% interest rates when the market is at 6.000%?
They use seller contributions to buy down rate. Figure that every .250% of rate buy-down costs 1% in points or a loan discount fee. If the rate today is 6.000% and you want to buy it down to 4.750% that would cost 5 points in discount fees. You still have 1% left over for clo
here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe
ing costs.
Are you offering these marketing possibilities to your clients? You need to get with your preferred lender to find out how you, too, can compete with the builders. Don’t just use seller contributions to cover closing costs. You too can offer a home with a rate in the high 4.000’s%.
Here is the catch: The amount of seller contribution cannot exceed the actual amount of closing costs and it CAN NEVER be given back as a cash incentive to the buyer.
This is where the dark side of my newsletter begins….
In the summer, I did a loan for Jerry and Lorraine buying their dream home of $850
Are you offering these marketing possibilities to your clients? You need to get with your preferred lender to find out how you, too, can compete with the builders. Don’t just use seller contributions to cover closing costs. You too can offer a home with a rate in the high 4.000’s%.
Here is the catch: The amount of seller contribution cannot exceed the actual amount of closing costs and it CAN NEVER be given back as a cash incentive to the buyer.
This is where the dark side of my newsletter begins….
In the summer, I did a loan for Jerry and Lorraine buying their dream home of $850
d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.
Combination pro
Combination pro
,000. The
home had been on the market for around three months. They needed 100% financing and
during the loan application, Jerry said to me, “Not only is this house a great deal but the seller is
giving me $50,000 cash back at the close.”
Jerry was planning on using this money for window coverings, new flooring and a plasma TV for the family room.
I cringed. It was painful to inform him that this was illegal. His agent hadn’t told him this. He still went forward with the transaction at a reduced sales price of $800,000. A few months later we were able to still get him new flooring and wind
Jerry was planning on using this money for window coverings, new flooring and a plasma TV for the family room.
I cringed. It was painful to inform him that this was illegal. His agent hadn’t told him this. He still went forward with the transaction at a reduced sales price of $800,000. A few months later we were able to still get him new flooring and wind
ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc
w coverings through a home equity line of credit.
The new plasma TV couldn’t wait. It had to go on his credit card.
Cash-back is an American tradition. Cash rebates are offered on all sorts of products. Some credit card companies will give you cash-back on the purchases you make. In Las Vegas, we are used to giving out cash for better services at hotels, restaurants, clubs, and to avoid long lines.
However, cash back in a real estate transaction is illegal from a lending perspective.
Seller contributed closing costs, which are legal, are not paid in cash but as a credit from the seller to
The new plasma TV couldn’t wait. It had to go on his credit card.
Cash-back is an American tradition. Cash rebates are offered on all sorts of products. Some credit card companies will give you cash-back on the purchases you make. In Las Vegas, we are used to giving out cash for better services at hotels, restaurants, clubs, and to avoid long lines.
However, cash back in a real estate transaction is illegal from a lending perspective.
Seller contributed closing costs, which are legal, are not paid in cash but as a credit from the seller to
easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi
the buyer. They are fully disclosed and paid directly to the third parties through escrow.
This is different. I am talking about getting a nice big fat wad of cash or a big check at the close.
Here is how it works. Johnny Vegas goes out looking for a house. He finds one he likes listed at
$350,000. He offers the seller $375,000 but he wants $25,000 to be kicked back to him at the
close of escrow. Every one makes out on this deal! The buyer gets a big payday or new TVs or
furniture or flooring. The seller gets his asking price. The real estate agent gets a bigger
commission. The loan officer
nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically
ets a larger loan and an increased commission. The lender gets a
more sizable loan with more interest over 30 years. And the neighborhood keeps its value in a
declining market.
So what’s wrong with that? It’s a buyer’s market. Home builders are offering incentives as high as $75,000. So why can’t you?
For one, the home builder does not offer incentives in cash. They offer incentives built into upgrading the property like flooring, pools, landscaping and sometimes, house payments for a year paid though escrow, or closing costs. Never cash back.
The problem with cash-back is that this transa
So what’s wrong with that? It’s a buyer’s market. Home builders are offering incentives as high as $75,000. So why can’t you?
For one, the home builder does not offer incentives in cash. They offer incentives built into upgrading the property like flooring, pools, landscaping and sometimes, house payments for a year paid though escrow, or closing costs. Never cash back.
The problem with cash-back is that this transa
and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ
ction has defrauded the lender. The lender is
tricked into making a loan that now carries incredible risk. The buyer has none of his own money
in the property but has already made $25,000. The loan amount is higher, so if things get a little
tight for the buyer, and that’s a greater possibility, the buyer will simply walk away from the
home.
If he walks away from the home, he does so with an artificially inflated value, which, in turn, raises property taxes for everyone and leaves the lender with a home they will lose a substantial amount of money on in the resale market.
Major sub-prime b
If he walks away from the home, he does so with an artificially inflated value, which, in turn, raises property taxes for everyone and leaves the lender with a home they will lose a substantial amount of money on in the resale market.
Major sub-prime b
ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi
nks with billions of dollars in loans are closing their doors. Many of these
companies ran out of cash needed to repurchase loans that they had sold in the secondary
market because the original borrowers had defaulted. Schemes like cash-back at close are, in
large part, to blame.
For this to work an appraiser has to come in above the original asking price. This is a home that is now very likely upside down at close. The loan amount is higher than the actual value.
And what stops someone from going out and buying 10 houses concurrently in this scheme, adding $50,000 to each home, making $50
For this to work an appraiser has to come in above the original asking price. This is a home that is now very likely upside down at close. The loan amount is higher than the actual value.
And what stops someone from going out and buying 10 houses concurrently in this scheme, adding $50,000 to each home, making $50
ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.
Following aspects would a
Following aspects would a
,000 and then simply walking away leaving the banks
with foreclosed properties that are upside down? It’s a great business plan for someone who
doesn’t care about having their credit ruined, running from litigation and possible criminal
prosecution, or the big-picture, economic implication of large sub-prime lenders going out of
business.
There are people out there right now doing this. That’s why banks are so strict about this. The rule of thumb is that if a lender is not completely informed of ALL of the terms of the transaction in writing, then the transaction is illegal.
I have been pe
There are people out there right now doing this. That’s why banks are so strict about this. The rule of thumb is that if a lender is not completely informed of ALL of the terms of the transaction in writing, then the transaction is illegal.
I have been pe
dd to the challenges in developing combination products:
Which markets to tap where the combination products can do fairly well?
Which combination prod
Which markets to tap where the combination products can do fairly well?
Which combination prod
rsonally burned by three transactions like this in the past year. It has been very
costly for me financially. As a mortgage banker, I can be held personally responsible for the
loans we make. In all these instances, I have come to learn, the buyer never even saw the
house. That is a giant warning sign for you. You can be held liable as well. More signs are
below.
A lot of you reading this newsletter right now are shocked. Some of you probably think this idea is legal and simply a way to compete in a buyer’s market. Some will even write me to tell me that they had an attorney review these tr
A lot of you reading this newsletter right now are shocked. Some of you probably think this idea is legal and simply a way to compete in a buyer’s market. Some will even write me to tell me that they had an attorney review these tr
cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
nsactions and that this is perfectly legal.
I recently had to argue this with a respected, experienced real estate agent of 20 years. He was the listing agent on a $500,000 home. In the purchase agreement, it clearly stated the seller would give the buyer $75,000 at close. I called to tell him we could not do the loan this way. He argued that, he had spoken with a real estate attorney, and so long as this was disclosed in the sales contract, and the settlement statement at close, everything was legal and above-board.
He was 100% right. If you properly disclose the cash-back in the purchase a
I recently had to argue this with a respected, experienced real estate agent of 20 years. He was the listing agent on a $500,000 home. In the purchase agreement, it clearly stated the seller would give the buyer $75,000 at close. I called to tell him we could not do the loan this way. He argued that, he had spoken with a real estate attorney, and so long as this was disclosed in the sales contract, and the settlement statement at close, everything was legal and above-board.
He was 100% right. If you properly disclose the cash-back in the purchase a
tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
greement and the
final HUD-1, you are not doing anything wrong. However try and find a lender who will do the
loan. None will. This agent could not understand why we would not do the loan if he was doing
everything legally.
If a lender finds out about this in the middle of the loan process, you can expect the transaction to be cancelled or to be asked to try and accomplish the end result a different way. Maybe a reduction in sales price or additional closing costs.
If it’s not caught and the loan goes through, it might be caught in a post-closing audit. If this happens, the lender can call
If a lender finds out about this in the middle of the loan process, you can expect the transaction to be cancelled or to be asked to try and accomplish the end result a different way. Maybe a reduction in sales price or additional closing costs.
If it’s not caught and the loan goes through, it might be caught in a post-closing audit. If this happens, the lender can call
t?
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
the Note due. This means you likely have 30 days to pay it off in
full. You can find an "acceleration clause" in all mortgage loans. This allows the lender to
demand immediate repayment if the borrower lied at all in his mortgage application.
Even though no lender will touch loans with cash back, the problem really isn’t in the transactions where the kick back is written into the purchase agreement. Those can usually be explained to the buyer and seller and a restructuring of the transaction can be reached. The problem is in the ones where it’s not disclosed. This is where fraud occurs. If y
Even though no lender will touch loans with cash back, the problem really isn’t in the transactions where the kick back is written into the purchase agreement. Those can usually be explained to the buyer and seller and a restructuring of the transaction can be reached. The problem is in the ones where it’s not disclosed. This is where fraud occurs. If y
ping new procedures for reviewing their safety, efficacy and quality.
Professional from academic institutions, pharmaceutical industries, health care indust
Professional from academic institutions, pharmaceutical industries, health care indust
ou fail to disclose this kick back,
and you have knowledge of it, you are an accomplice to loan fraud. If this is discovered in an
audit of the file and you were involved, you can be held criminally, lose your license, fined and
even face jail time.
When loans go into foreclosure, banks audit the file very aggressively to look for the mistakes they made so as to try to never repeat them again.
There are banks out there that become no different than aggressive police detectives when a loan does into foreclosure. They may interview the buyer, the seller, and often the agents to find someone
When loans go into foreclosure, banks audit the file very aggressively to look for the mistakes they made so as to try to never repeat them again.
There are banks out there that become no different than aggressive police detectives when a loan does into foreclosure. They may interview the buyer, the seller, and often the agents to find someone
y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products
ho will “crack,” admit loan fraud, and then press charges against the parties they
believe guilty. They will threaten these parties with criminal charges and lawsuits to get to the
truth. This can occur years after the transaction has taken place.
My understanding is that this has become so prevalent in many cities that brokers have had meetings with their agents to go over this topic in detail.
OK, so what are the signs that this may be going on?
• Your instincts tell you something is “not right” about the deal.
• The listing agent is asked to raise the sales price or the buyer m
My understanding is that this has become so prevalent in many cities that brokers have had meetings with their agents to go over this topic in detail.
OK, so what are the signs that this may be going on?
• Your instincts tell you something is “not right” about the deal.
• The listing agent is asked to raise the sales price or the buyer m
.
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
akes an offer well above
list price and asks for cash back.
• Even though the property has been on the market a while, it sells for higher than every other like model in the neighborhood.
• The buyer, agent, or their “friend” vehemently insists on using their title company or appraiser.
• The commission to the agent is much higher than normal.
• The appraisal is obviously inflated.
• Neither the buyer nor the buyer's agent has ever seen the property.
• The buyer or buyer's agent claims that the extra money will be used for home repairs or renovations or paid to a
• Even though the property has been on the market a while, it sells for higher than every other like model in the neighborhood.
• The buyer, agent, or their “friend” vehemently insists on using their title company or appraiser.
• The commission to the agent is much higher than normal.
• The appraisal is obviously inflated.
• Neither the buyer nor the buyer's agent has ever seen the property.
• The buyer or buyer's agent claims that the extra money will be used for home repairs or renovations or paid to a
elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.
Companies that provide selfless information through particip
Companies that provide selfless information through particip
ontracting company to handle the repairs or renovations.
How serious is this? Bank fraud carries a maximum prison sentence of 30 years and a $1 million fine. Conspiracy to commit bank fraud has a maximum sentence of five years and a $250,000 fine. Its tough to lose a deal but its tougher to lose your license or your freedom. Know when to walk away.
The bottom line is lenders encourage seller-contributed closing costs because it usually creates buyers and opportunity. Cash back at close is discouraged because it can create a greater potential for loss, litigation, and criminal activity
How serious is this? Bank fraud carries a maximum prison sentence of 30 years and a $1 million fine. Conspiracy to commit bank fraud has a maximum sentence of five years and a $250,000 fine. Its tough to lose a deal but its tougher to lose your license or your freedom. Know when to walk away.
The bottom line is lenders encourage seller-contributed closing costs because it usually creates buyers and opportunity. Cash back at close is discouraged because it can create a greater potential for loss, litigation, and criminal activity
tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products
HTTP = HTML link (for blogs, profiles,phorums):
<a href="http://www.answers.org.ua/article/137247/answers-Seller-Contributions-and-Cash-After-Close--One-is-Illegal.html">Seller Contributions and Cash After Close - One is Illegal!</a>
BB link (for phorums):
[url=http://www.answers.org.ua/article/137247/answers-Seller-Contributions-and-Cash-After-Close--One-is-Illegal.html]Seller Contributions and Cash After Close - One is Illegal![/url]
Related Articles:
How To Pick A Million Dollar Income Affiliate Program
Retail Store Credit Cards - A Great Way To Establish Solid Credit
Bookmark it:
|