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stevetcg · Nov 23, 2008, 05:14 AM

We are in the market for a new home. Ive gone through the financing part and got approved for significantly more than we intend on spending. The market in our area is glutted with homes selling for 10-25% under appraisal and competition is fierce for legitimate buyers.

So here is my question: if our new home appraises for 250K and we get an approved offer for 220K, is there anything that says we can't work a deal with the seller that we agree on 240K and they give us 20K cash back?

Follow-up question: if this is possible (and I believe it is because I hear about getting credits for repairs and such) is there a rule or limit on what the money can be spent on? For instance - could we use it to put in a pool? Upgrade the kitchen cabinets? Pay off our car? Buy out our lease? Take a cruise?

Thanks in advance for your insights.

tickle · Nov 23, 2008, 06:42 AM

I don't quite understand what you are getting at. Let me go through this. You find a home that is priced at 250K and you offer 240K; it is accepted by the sellers. That is the bottom line and a straight forward real estate deal; but where do you get them giving y ou 20K back.

Just how much has the bank approved you for ?

Am I right ? If not, please explain a little bit more in depth.

But what you really mean is you fudge the paperwork. You won't get an agent willing to do that though because on paper that would eliminate their commission and doing a real estate deal like that private, would be more less collusion and that is fraud.

ScottGem · Nov 23, 2008, 06:54 AM

Why would a seller do this? The extra $20K may represent taxable income to him. Even if it doesn't, I just don't see what advantage this would be to the seller.

If your lender has approved you for more credit then you will use, ask for a home equity line of credit. If you will have enough equity in the hourse you can get your $20K that way and use it for whatever you want.

stevetcg · Nov 23, 2008, 07:01 AM

Originally Posted by tickle

I dont quite understand what you are getting at. Let me go through this. You find a home that is priced at 250K and you offer 240K; it is accepted by the sellers. That is the bottom line and a straight forward real estate deal; but where do you get them giving y ou 20K back.

No - the seller agreed to 220k but the bank approved up to 250k (the appraised value)

stevetcg · Nov 23, 2008, 07:06 AM

Originally Posted by ScottGem

Why would a seller do this? The extra $20K may represent taxable income to him. Even if it doesn't, I just don't see what advantage this would be to the seller.

If your lender has approved you for more credit then you will use, ask for a home equity line of credit. If you will have enough equity in the hourse you can get your $20K that way and use it for whatever you want.

Why? In order to make a sale in a stagnant market where the median time on market is approaching 24 months.

But I see what you are saying. The HELOC and the cash back amount to about the same thing, but with different terms and payments, correct?

So let me add this additional question if I may: I read an article that said when they made their sale agreement it included 5000 in home repair credits at closing. Isn't that essentially what I was originally asking about? Or is that an additional amount taken off the sale price after the home inspection was completed?

Im pretty new at all of this... second time home buyer but my first I wasn't much involved in the process.

ScottGem · Nov 23, 2008, 07:26 AM

It is, but in this case its written into the contract. A $20K kickback, would be looked on as a shady deal. But writing into the contract that seller will reimburse the buyer for $5K of necessary repairs is a different story.

jimmynoble12 · Nov 24, 2008, 10:20 PM

The only loans right now that will allow a buyer to get money from a seller at the end of the deal and to have 100% financing is a VA loan. Please check with your lender to find out for sure as he/she will be able to give you the specific details and/or requirements for money down and exactly how these funds can be applied to your loan

jjwoodhull · Nov 24, 2008, 10:30 PM

I got money back from the seller when small problems were found during the final inspection - but it was written into the contract.

I agree with what all the previous posters have said and would like to add one thing...

In these crazy economic times, maybe it's better to not max out your credit just because the bank approved you for that much. What will the difference in your loan payments be if you take a loan only for what you need instead of what you are approved for? I would guess about $200 a month. Maybe this would make a difference somewhere, or maybe not. But it's worth thinking about.