Giving cash back to my buyer….Possible? (agents, contract, closing)
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I’m selling a house with some issues. I am thinking of offering an amount of cash back for a full price offer to my buyers at closing to give them funds towards repairs. Is this possible to do without the Title company rolling it into closing costs or reducing the price of the house?
If you grant the buyer a "closing cost credit" then you offset the amount of money they need to bring to the closing. Since they don't have to bring as much money to the closing, functionally it's the same as putting the money directly into their pocket.
Don't reduce the price of the house. Unless the buyer is paying cash, this only reduces the principal amount of their mortgage and maybe the amount of downpayment needed both by (I have to guess because I don't know how much you're giving them for these repairs) a small amount. Essentially, you put a tiny amount of money in their pocket and reduce their monthly mortgage payment by a microscopic amount.
If your buyer really needs the funds to make the repair, they'll get a more immediate benefit from the closing cost credit.
The Lender would (Legally) want the Title Company to set up an Escrow account and hold the money while the work is being done.
But many Title Companies are reluctant to get involved with these issues, repairs and paying Bills. Talk to the one you are closing with and see if they will hold in Escrow.
You could do something that may be illegal and give them a check after closing. You should probably 1099 them to be a little less illegal.
Lenders (and probably the Govt) do not like Buyers getting cash back after closing unless it's all disclosed. Paying closing costs is the more usual way it's done. That way it's disclosed and on the Closing Statement.
I’m selling a house with some issues. I am thinking of offering an amount of cash back for a full price offer to my buyers at closing to give them funds towards repairs. Is this possible to do without the Title company rolling it into closing costs or reducing the price of the house?
Don't overcomplicate it. Earmarking funds is just not necessary.
The buyer is generally working with one bucket of money to buy and renovate.
Don't mention repairs in your contract. Just offer to pay up to x% of the buyer's closing costs, rate buydown, whatever the lender will allow. Without an earmark.
That credit will just be added to the buyers' bucket of working money and achieve the purpose you are considering.
Cash buyer?
Just set a contract price that recognizes reasonable anticipated costs.
Seller credits for things like new carpet used to be a thing... but lenders now frown on cash going directly from seller to buyer.... They don't like the idea of lending money that seller just gives back to buyer. As Mike said... closing cost credit would be a good way to go in that case. If you end up with a cash buyer, just reduce the price.
Do you have a specific request yet? I'd wait and see what the buyer wants before worrying too much about it.
I’m selling a house with some issues. I am thinking of offering an amount of cash back for a full price offer to my buyers at closing to give them funds towards repairs. Is this possible to do without the Title company rolling it into closing costs or reducing the price of the house?
OP, has the buyer asked you to repair these or asked for credit back towards them making the repairs themselves?
OP, has the buyer asked you to repair these or asked for credit back towards them making the repairs themselves?
The house needs foundation work and I have a quote from a reputable company for $5900 to do the work. I am not local and simply don’t want to deal with it but am quite willing to give a credit of $6K for a full-priced offer. The house is priced competitively. The only repair work needed is the foundation. All the rest is cosmetic. But I have gotten feedback from agents that buyers are afraid of the foundation work. I have had 3 offers from wholesalers and they are just ridiculous offers.
So I thought making a credit back might be worth a try……..
The house needs foundation work and I have a quote from a reputable company for $5900 to do the work. I am not local and simply don’t want to deal with it but am quite willing to give a credit of $6K for a full-priced offer. The house is priced competitively. The only repair work needed is the foundation. All the rest is cosmetic. But I have gotten feedback from agents that buyers are afraid of the foundation work. I have had 3 offers from wholesalers and they are just ridiculous offers.
So I thought making a credit back might be worth a try……..
Banks are afraid of structural issues too. It may be hard for someone to get financing.
Banks are afraid of structural issues too. It may be hard for someone to get financing.
How bad is the damage and is it obvious?
Not bad at all and of course I could have the two cracks in the sheetrock repaired and the closet doors that stick could be shaved and leveled to close properly. But that’s dishonest because the house really should get some piers and the front sidewalk should be replaced so water doesn’t puddle. The source of the problem is the puddling around the front walk which has caused that section of the house to shift. Quote for repair with “Liftetime warrany” is $5900 for the whole job including the Engineer’s report.
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