Quote:
Originally posted by turbo6bar
Earlier today, I met with a realtor who told me about a contract she just received.
Here are the details:
List price of home: $129,900 (yeah, this is east bumble*****, USA. Houses are cheap.)
Buyer's agent offered a contract for
$149,900
Out of the $149k, the seller is paying $15k for the buyer's 10% down payment. There are non-profit associations that take the $15k and gift it back to the buyer. Seller is also paying ~3% closing costs.
The buyer is basically getting into the house for zip-zilch-nada. The buyer has no money in the deal, so there is less incentive to maintain, improve, and build equity.
Insane in da membrane is all I gotta say.
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BZZZZZZZZZZT!
Wrong answer. What they are doing is a "gift equity" situation. Only works between immediate family. They have to prove that they are immediate family involved. And, if you do that they will insist to see all parties credit reports to make sure it's not a distressed sale (Mom is in foreclosure and son is gonna bail her out)- they will simply not approve that
Lender will not allow the seller in any way, shape or form to pay the downpayment so there is a downpayment and therefore a lower Loan To Value.
Did the realtor cook this up? Dumba$$. This will never, ever ever work. The proper way is to set it up as an 87% 1st / 13% 2nd and tell the bank that the Seller is "carrying back"$ 20K and have the bank qualify it on that.
This method requires a bit of trust - what will happen is that escrow will draw it up as a note (for the $20K) between the Buyer and Seller -
The day after closing, the Seller marches back into escrow and declares that the $20K note is forgiven and no repayment is due.
Instant equity.
I'll take my $5k fee now please....
rjp