Seller carry back. Not payable. - Posted by Kevin Welland

Posted by Ed Garcia on October 24, 2000 at 10:45:18:


Remember that when your seller forgives the second, they will still be charged with what we call phantom income. The seller is showing that they made $10,000 more in their sale than they actually did. So weather or not the seller realizes it, they will be STUCK with paying taxes on the additional $10,000.

Yes, many investors play games when doing a deal, however I’m surprised that the RE broker is telling you that this is a common practice because it’s not. And most brokers don’t like to get involved with LENDER FRAUD. Yes it’s true, dealmakers know how to play this game, but the truth of the matter is, it’s LENDER FRAUD. You see the reason you are doing the addendum is so the lender won’t catch it. You know that the lender will either NOT do the deal or require PMI, so you’re doing this to DECEIVE the lender, other wise you would have disclosed it.

Kevin, I’m not trying to mess up your deal, but when you ask my opinion, I have to tell you how it really is. When we do things that benefit us that could even be ILLEGAL, we JUSTIFY it. I think it’s funny how many people do this on a daily basis and consider it CREATIVE REALESTATE, when it’s not creative at all. It’s just LENDER FRAUD.

Ed Garcia

Seller carry back. Not payable. - Posted by Kevin Welland

Posted by Kevin Welland on October 23, 2000 at 17:36:54:

I am in the process of structuring a deal on small multi family. Seller suggested that they would take back a 2nd for 10%.However there would be an addendum to the contract that this would not be payable. This would make the terms offered by the mortgage company more attractive, no mortgage insurance would be payable resulting in increased cashflow from the property.
ie 80-10-10 with 10% not payable to seller.
The seller and RE agent suggested that this was common practice.
Does any one do deals like this?
The property will easily be appraised at the full 100%.
I do feel a little uncomfortable deceiving the lender.
Any advice.