Posted by Mark R on April 02, 2005 at 09:41:29:
As a mortgage profesional I might suggest you are doing this backwards. Many of my lenders will allow 80% loan with a 20% seller carry back and allow for 3% seller contribution to your closing costs. In this case sounds like your seller doesn’t care about the 20% so just get 100% financing on the asking price not the appraised value and have him pay 6% or all of your closing cost doing a Zero down deal.
Creative Financing and Lender Fraud - Posted by Todd R.
Posted by Todd R. on February 17, 2005 at 12:13:52:
I am buying a property for 100K. The seller is making the down payment of 20K, and doing so in my name - the check will appear to be coming from me. I’m borrowing 80k, and thus have no PMI from a bank.
Does anyone see anything illegal with this? Also, would I have to pay taxes on the 20K as a gift of some sort?
Re: Creative Financing and Lender Fraud - Posted by Luisa Minkevich
Posted by Luisa Minkevich on August 01, 2005 at 23:27:23:
An investor has offered my partner and I $200,000 for our home which we had planned on listing for roughly the same amount. Sounded great until he mentioned he wanted us to sell it to him for $250,000 and sign an Assignment of Contract drawn up separate from the contract that allows him to keep $50,000 at closing. He had it appraised for $256,000, and wants a quick closing. Is that transaction legal? Could my partner and I get into legal trouble?
Ask your broker - Posted by Rob Ricker
Posted by Rob Ricker on February 20, 2005 at 21:21:08:
Despite what others have said … unless you are expected to pay back this money to the seller, I see no way that you can commit fraud doing this. The lender will either “season & source” the down payment and stop you in your tracks before closing, or they will not “season & source” down payment, and that means they don’t care where you get the money from. Ask your broker what the lender requires.
Re: Creative Financing and Lender Fraud - Posted by River City
Posted by River City on February 18, 2005 at 06:15:36:
Paying taxes on the $20K is the least of your worries if you do this. I do not call this “creative financing.” I call it “fraud.” Run this past your lender and ask them if it is legal. They are going to tell you that you it is not allowed.
Read the language in the loan application. If you commit fraud, you run the chance of being fined and imprisoned. You need to read the industry news. People are being caught for this almost on a daily basis. Is it worth it to you? Are you an honest person? Evidently not if you are considering something like this. You will always be wondering if they are going to find out.
Re: Creative Financing and Lender Fraud - Posted by Tom-FL
Posted by Tom-FL on February 17, 2005 at 18:33:42:
OK, here’s your subject line:
Creative Financing and Lender Fraud
Then you ask:
Does anyone see anything illegal with this?
Yep lender fraud is illegal.
Re: Creative Financing and Lender Fraud - Posted by Todd Rogers
Posted by Todd Rogers on August 02, 2005 at 06:05:33:
What you described in your question sounds fairly clear; it’s lender fraud. The tricky area is in what appears to be an inflated appraisal. If the lender discovered what appears to be a major disparity between appraisal and actual, they will not hesitate to turn it over the federal authorities. Two years ago, a deal like what you described, while still fraudulent, would be overlooked. With the recent influx of real estate investors in to the business, and subsequent crooks following the money, the feds now pursue nearly all leads. I say run, don’t walk, away from this deal. The investor is trying to manufacture equity where it does not exist: not good. Deals like this land people in jail.
Good luck!
FYI … This may not be fraud - Posted by Rob Ricker
Posted by Rob Ricker on February 20, 2005 at 20:52:31:
Quite a few mortgage companies allow “non seasoned” down payments … which means they don’t care where you got your down payment or even when you got it, just as long as it comes from YOUR bank account. it can come from the seller, your parents, or out of a trash bin … they don’t care. These mortgage companies are basically working on the “don’t ask don’t tell” philosophy and usually charge a little bit higher interest.
Re: Creative Financing and Lender Fraud - Posted by luisa
Posted by luisa on August 02, 2005 at 10:15:35:
That’s what we were thinking. We did talk with a real estate lawyer yesterday- who seemed to agree also. He said that if we could get a letter on the letterhead of the law firm(s) that represent the investor stating that everything is legal etc., that we would be “protected” in a sense by that firm. Of course, he said he would be very surprised if we actually obtained such a letter. We asked the investor if he could have his lawyer(s)(he says he has two) write that letter for us…he said he could- but we’re waiting to actually have that in hand. If we receive that letter, do you think it would be “safe” for us to proceed with the transaction?
We’ve called the Carleton Sheets advisory line 3 times, and they seem to think we would be fine- isn’t he an advisor on this website?
Thanks…
Re: FYI … This may not be fraud - Posted by Todd R
Posted by Todd R on February 21, 2005 at 07:32:07:
As I suspected. I have conflicting opinions from attorneys. One says run for your life, the other says wow, that’s a great deal. Detractors here say illegal.
Thanks for the input.
Re: FYI … This may not be fraud - Posted by River City
Posted by River City on February 21, 2005 at 08:24:52:
There are limits as to the amount of money a seller can contribute in the way of closing costs on a loan. Lenders do not normally allow a seller to contribute 20% because it can make the loan unsaleable on the secondary market. If it is a loan they are going to keep in their portfolio, they might not care. At the closing of the loan, the lenders generally have the borrower and the seller sign a statement that indicates there are no agreements between them that have not been disclosed to the lender. This scenario is the reason for this disclosure.
Like I said in my earlier post, if you want to know if it is legal, ask the lender.