Question Details

Kathy Ambros, Home Seller in 33156

Sounds like a mortgage scam!

Asked by Kathy Ambros, 33156 Sun Feb 3, 2008

Our house is on market 515K. An reputable broker company's agent came with clients and offered to raise the price to $525K if we gave buyer $25K in closing costs and $25K towards down at closing. In reality making it a 475K offer.2 We countered with 500K and they rejected our counter. Doesnt that sound like some sort of scam? Is it even legal for the agent to offer it? We finally are excited that we were getting an offer and it turned out to be a possible scam.

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Answers

6
There are many loan programs out there that fit this scenario and they are typically referred to as "seller downpayment assistance programs". You as the seller should not be worried as long as you get all your monies you are owed and that they don't ask for you to pay for anything upfront. This type of financing gets the buyer into the house with little or no money down. There is usually a seller participation fee... a few hundred dollars that may have been rolled into the 25K closing costs.

The one thing that looks weird is the 25K in closing costs, even if it included prepaids, that amount is HUGE!!! unless it includes several points. But as Cheryl explained, the house has to appraise for the entire sales price, not just the loan amount.
Web Reference: http://www.sumnerrealty.com
1 vote Thank Flag Link Sun Feb 3, 2008
Thanks to all for your help. I think we will steer clear of this one. We are priced well below market at 515K since we did a pencil appraisal and it came back at 580K. We purposely priced way low to try to sell faster.
0 votes Thank Flag Link Mon Feb 4, 2008
Like the others say, it's not a scam. But it's a pretty shaky deal, more along the lines of what was going on a couple of years ago. I could be wrong, but it sounds as if the buyers have virtually no cash, and they're stretched to the limit on what they can pay. No cash--because they're looking for $50,000 from you. And stretched to the limit because they rejected your counter of $500,000. (Did the agent present a pre-qualification letter from the buyers?)

And, as others note, your house has to appraise for the sales price. In today's market, lenders (and thus appraisers) aren't as generous as they were a couple of years ago, especially when prices were rising month by month. If you've got a good agent, your house is probably priced pretty close to the comps. Could be a stretch to appraise for $10,000 more...though you'd know better than I.

And the problems with these types of transactions--buyers strapped for cash, buying the most house they can afford, hoping the property will appraise for more than it was even listed for--is that they're more prone to glitches on the way to a sale. Not to say that it'd fall through, but there's more of a risk that it might.

Consult with your own agent. And examine/reexamine your own situation and motivation. This might be an acceptable deal for you. Or it might not. Depends on your personal circumstances and needs.

Hope that helps.
0 votes Thank Flag Link Mon Feb 4, 2008
Don Tepper, Real Estate Pro in Fairfax, VA
MVP'08
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Kathy
There are a couple of possibilties.
When a offer is written with a large amount of cash due back to the buyer, red flags should be raised.
First, your Realtor should have resources to determine if the offer is legitimate.
Secondly, there are transactions where the buyer does ask for a lot of cash back, then after the close of escrow vanishes, with the cash, and the lender has to foreclose. So YOU would not be burned, however the lender might be.
0 votes Thank Flag Link Sun Feb 3, 2008
Keith Sorem, Real Estate Pro in Glendale, CA
MVP'08
Contact
It's not a scam but the buyers lender must approve any credit given by the seller for closing costs. I believe a seller can credit up to 6% of the offer price back to the buyer for closing costs. Of course, the property must appraise at the amount they are offering.
0 votes Thank Flag Link Sun Feb 3, 2008
Well, I don't think it's a scam. But if I was your agent I would be concerned about raising the price when in reality it's much lower than asking. Let's say you agreed to it. If I was your agent, I would warn you: They are trying to get you attached to this, psychologically and they hope that it appraises low (lower than $525) which means they'll have yet another card to throw at you after the appraisal. I would much prefer that we simply lower your price to $475 and let them sort out the cash flows :) This keeps you safe from a low appraisal. However, they are interested in getting this house for very little money down, perhaps zero (it depends on what type of loan they are getting....they could actually walk away WITH money lol).
Anyway, get an agent.

Brendan Murphy
Broker, CRS, GRI, ePro
Raving Real Estate
Laramie, WY 82070
0 votes Thank Flag Link Sun Feb 3, 2008
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