Offers of cash back at closing are incredibly appealing, but prospective buyers are often leery of these generous gifts and concerned about their legality. As it turns out, this concern is highly justified. There are a number of common, cash-back scams that are being used to deceive lenders into approving loan applications that they might otherwise reject. Following, Downtown San Diego real estate agents discuss several ways to determine whether these offers are legit or a sign of bad business practices.
Two Separate HUD Statements
Real estate brokers are commonly told that all transactions are entirely legal, as long as the details of these transactions are accurately recorded on the related HUD statements. There are, however, multiple instances in which two separate HUD statements are generated for a single sales transaction. One is generated for the purpose of closing while the other sent to the bank for review. Moreover, the second statement is drafted to camouflage pertinent transaction details such as a newly created seller obligation or a considerable junior loan. As a result, important disclosures are not being made to the lending institution that’s funding the deal and any cash back received is part of an illegal transaction. In instances in which two, separate HUD statements are generated and one is crafted to hide transactional details from a lending institution, rules are being broken and problems can ensue.
Legal Cash Back Offers
There are, however, a few instances in which getting cash back at closing is entirely legal. For instance, you can legally get cash back at closing if refinancing your mortgage and cashing out some or all of the home equity that you’ve built in your home. In this case, getting cash back at closing is likely the sole purpose of the transaction and the lender is not being misled concerning any aspect of the funding process.
Some agents may agree to refund some of their commissions after sales have come to a close. This is a separate agreement between buyers and their agents and does not have any bearing on funding decisions that are made by the bank. Many buyers’ agents do this in order to sweeten the deal for their clients and to ensure that transactions actually go through.
Retrieving Your Own Money
On rare occasions, buyers may receive their very own cash back at closing after having made deposits into escrow funds. This is only the case when a loan is obtained for the full amount of the condo for sale in Downtown San Diego. The resulting credit is the buyer’s own money and thus, there are absolutely no legal conflicts within these arrangements. Ultimately, the surest sign of an illegal cash back transaction is any purposeful attempt on the part of buyers and brokers to defraud lenders by concealing pertinent sales information.
For more information, give us a call at (619) 649-0368 and speak with a knowledgeable and experienced real estate agent today! We specialize in downtown San Diego properties, including lofts and condos for sale in the Gaslamp Quarter, East Village, and Little Italy. ')}