Hello, I'm looking to purchase a home that is valued in the 300K range but is only listed at 250K because the owner is looking to unload it. I am doing a Stated/Stated loan that requires 5% down and I'm unable to go that route at the moment. I spoke to the agent that us selling the house and they mentioned that if I over offer on the house above the listed price, they will gift it (up to the 50K in equity) towards the down payment to cover the 5% needed down. How is this possible and how would I need to go about this to make it legal and not end up getting screwed overall?? If this is not possible, How might I come up with 5% for this transaction outside of the norm?? Thanks

Hello m:

The above scenario presumes the bank is stupid. Some banks are. They're in lots of trouble these days. I don't think you're going to find a stupid bank.

In the first place, you say the house is "valued" at $300K. Who told you that? The realtor?? They would. But-------, SIR, the value of ANYTHING is what someone is willing to pay for it. If all they want is $250K, and that's all you're going to pay, then it's valued at $250K. Oh sure, maybe it USED to be worth $300K, but it's not now. Besides, the value that would be of interest to you, would be the "appraised" value. That's the value the bank puts on it.

If the seller is only asking $250K, the bank isn't going to appraise the house above that. Or at least, I don't think they will. In any case, hire an appraiser yourself and find out. You could even use the one your lender would use. That way, it can suffice for the bank too. An appraisal costs, what? $300?

Next, the bank is going to want to know where the down payment came from. The bank is not going to give you a loan, so that you can pay the sellers, so that the sellers can kick back the down payment from the proceeds of the loan. No bank is going to do that.

Where can you get money you don't have?? I don't know. Creative financing ain't going to do it. Of course, I could be all wet.

excon

Maybe I should elaborate a little better, I Know that value of it will appraise at 300K, I'm curious if I may purchase the house at 275K and request the seller to contribute 25K towards down payment and CC (which they have already agreed to as long as they get the 250K they listed it for). A relative of mine is doing the loan side of the transaction and a different relative is doing the RE side and both are basically throwing their commission out the door to help me get this home... Is it legal for the seller to contribute towards the down payment out of the equity in the property?? Basically, I'm getting a loan for 250K but buying the house for 275K getting 25K towards down and cc and helping to keep the value in the neighborhood since the surrounding homes are in the 300K price range and I'd like to keep their value as high as possible(and mine also)... Any advise?