Can a seller provide cash rebate on close?

[ZacharryBeaug]

Hello,



Just attended ACRE over the weekend as a guest, learned some very valuable information..



One question I have... Can a seller provide a cash rebate on close under any circumstances? This realtor website makes it seem like its okay if a realtor is not involved: http://www.bellevillerealestatebroker.com/seller_cash_rebate.html .



There seems to be some conflicting info out there though and just wondering if anyone could provide clarification.



Thank you

 

[Matt Crowley]

Probably not and make sure you explain the strategy to your mortgage broker beforehand. I don't really see why having a Realtor involved should complicate the process otherwise though.



Last year, I negotiated for $15,500 as a holdback from the seller. When they failed to perform, we eventually got the cash. However, the deal went over 60 days past closing, and despite the fact we disclosed everything to the lender, our deal nearly didn't go through do to the appearance of a cash back.



I doubt the attitude on cash backs has improved much since, but some lenders may be willing.

 

[Sherilynn]

Quite correct that many banks do NOT like cash back for any reason, even reno's.



One strategy that has worked for us and our banks is to arrange for reno money to be held in trust by our lawyer and only released directly to the contractor after repairs/upgrades were completed. Since the money never came near me, and went towards improving the property (thereby increasing its value), the bank was okay with it.

 

[Thomas Beyer]

Some people also steal apples at Safeway and get away with it .. so they can steal .. but are not supposed to.



Not disclosing vital info to the bank is also referred to as mortgage fraud, and yes people can do it but are not supposed to .. and some get away with it and some get caught ...



Other folks use friends as appraiser to get inflated appraisals .. so lots of stuff is done in the grey zone and/or outright illegally .. you decide if you wish to play in an area you can play in ..

 

[Sherilynn]

Absolutely correct, Thomas. Undisclosed rebates of any kind are fraudulent. This includes gift cards (although some realtors have tried to tell me that gift cards are okay).



The bank is funding a mortgage for the purpose of buying the property, and therefore expects to be paying only for the property itself (and perhaps improvements). They certainly don't expect to be paying for the buyer's new snowblower from Rona.