Amy Aldrich,  in Beaufort, SC

Is it OK to offer cash back at the closing as an incentive?

Asked by Amy Aldrich, Beaufort, SC Mon Jun 22, 2009

Help the community by answering this question:

+ web reference
Web reference:


Barbara Q., , Bergen County, NJ
Wed Jun 24, 2009
FRED SAID "*** Suggest: Lower the Price Instead ***

80% to 85% of Buyers are searching the Internet for houses. based on price range."
This is true...We agree that Price is key...

" But incentives may get people in the door, especially at lower price points. Once in the door, the potential buyer may decide to buy something. The lure of the prize may be the catalyst for the sale."
"While a $20,000 or $30,000 reduction in price seems nice, a lower interest rate through paying down points or a buy down can save the buyer more money over the life of a loan."…

Aggressively priced PLUS a Concession Package if you are looking for a catalyst or competitive edge in today's challenging market. Think outside the box...
Web Reference:
1 vote
Barbara Q., , Bergen County, NJ
Mon Jun 22, 2009
JACK - Yes and No.
No. You cannot legally slip a brown bag full of cash under the closing table to the Buyer.

YES! You can offer to pay the Buyer's closing costs.
You can also pay discount points at closing to lower the Buyer's interest rate/monthly payment.
A Temporary Buydown is an inexpensive way for you to increase your market potential.

Everything has to be spelled out in the contract.
There are restrictions on max allowable seller concession (FHA 6%)

If you have questions regarding Seller concessions and Buydowns please contact me:

Web Reference:
1 vote
Lban2, Home Buyer, Williamsburg, VA
Mon May 20, 2013
No, it is illegal. I know pepole who got locked up for taking cash at the table. That practice is gone with the wind fabulous!
0 votes
Jasbir Gujral, Mortgage Broker Or Lender, Pleasanton, CA
Sat Jul 4, 2009
Make sure it is approved by the lender otherwise it will be considered Lender Fraud. I am sure Realtors want to protect their livelihood. Most of the time this is the best way to pay for closing cost. Reducing price of the home is good idea but if buyer is short of cash pay for non recurring closing costs.
0 votes
Deneen Thomas, Agent, King Of Prussia, PA
Thu Jul 2, 2009
I am sure the buyer would like to have cash back at the closing. who wouldn't ?

However, The lender may not allow the buyer to have any cash given back to them at closing. I have been at settlements where the lender was counting every penny the buyer had and if an extra one hundred dollars was in their account they wanted gift letters or verification of where that money came from.

Also, The lender may not release the wire transfer of the funds if they see the buyer walking away with a check on the final HUD1. My answer is yes it is Ok to offer cash back as an incentive at closing. but check with the lender or loan officer first.

Deneen Thomas
Century 21 Advantage Gold
0 votes
Orin Sherman, , Honolulu County, HI
Tue Jun 30, 2009
I think the easy answer is YES! It is a great incentive especially if you are NOT worth your weight in gold as an agent and need to compensate with a tacky gimic like rebates for closing costs. I'm joking of course, however, it is a competitive World and it is capitalism at its finest. Be careful not to break the law or step on the toes of other professionals.
0 votes
Aurien Preiss, Agent, Gilbert, AZ
Sun Jun 28, 2009
Yes Jack, it is okay to offer cash back at closing. Many first time buyers would need it for the closing costs involved with the purchase of the home. So you can look at it in a couple of different ways, from a buyer's perspective needing help just to get to closing or is the cash incentive for new flooring or paint because the property needs it. Sometimes it sends up a red flag to the buyer before they even see the property, such as questions of deferred maintenance. In this market, it may be better to just to lower the price.
0 votes
Dennise Acos…, Agent, Miami, FL
Thu Jun 25, 2009

Depending on your state this may or may not be acceptable. There are other incentive that may be just as attractive. Remember when people move they like to make changes to make the house their own... think of what would be a necessary cost and offer that instead.
0 votes
Jane Francis…, Agent, Charlotte, NC
Wed Jun 24, 2009
In compliance with state and federal law (RESPA) the $$$$$Money is easier in the form of a gift card or something of substance and is subject to the buyer's lenders approval and must appear as a credit to the buyer on the HUD-1 settlement statement at closing. (HUD-1 is the complete financial break down of your home transaction)...other wise you may find trouble at the end of the deal...keep the lender and the attorney in the loop.
Web Reference:
0 votes
Fred Griffin, , Tallahassee, FL
Tue Jun 23, 2009
Greetings from Florida

Can you the Seller offer Cash Back at Closing?

Yes, but...

As a General Rule,
all parties to the transaction, including the LENDER, must be fully informed and give consent.

As stated by a previous poster,
the dollar amount will almost always be recorded on the HUD-1 or other Official Closing Document.

Some Lenders will balk at what they consider a "Concession or Monetary Gift to the Buyer",
depending on the type of loan, the Buyer's Financial Qualifications, etc.,
and some Loan Types will outright prohibit it.


*** Suggest: Lower the Price Instead ***

80% to 85% of Buyers are searching the Internet for houses.

Look at the Search Boxes on Real Estate Websites (including Trulia)

Notice that "Price Range Minimum to Maximum" is the prominent Search Box.

That PRICE BOX is going to be the deciding factor in whether they even see your house -
Price is the Number One item in the minds of the Buyers.

Whereas, on the contrary, Search Terms like "Seller Concessions" or "Cash back at Closing"
are not as prominent, or even non-existent.
Very few Buyers are going to plug values into those boxes.

By lowering your Price, you increase the chance of getting more Buyers to see your house listing.

Best wishes to you,
0 votes
Rebecca Hamb…, Agent, Bridgeport, AL
Tue Jun 23, 2009
You could do like some do in FLorida, offer a car or a house full of furniture as part of the property sale. Of course, you need to add to the contract the car and furniture has no value.
0 votes
Tim Parker &…, Agent, Williamsburg, VA
Mon Jun 22, 2009
You can offer a credit to the buyer to apply usually towards his closing costs. There is typically a limit to the amount a lender will authorize a buyer to receive and the credit has to be accounted for in the HUD1 statement at closing.
0 votes
Jim Mellen, Agent, Williamsburg, VA
Mon Jun 22, 2009
Carl was quick to answer, while I pondered that. His answer is correct, you may not when there is a lender involved. That is exactly what created a lot of the appraisal issues and mortgage fraud issues the lenders are dealing with today. In Virginia now VHDA has approved the use of the stimulus tax credit at closing, so perhaps getting the buyer to qualify for a VHDA loan would solve the problem you are having. This may eventuallu be available from other lenders and loan types, keep your fingers crossed.
0 votes
Carl Ben Wit…, Agent, Upper Montclair, NJ
Mon Jun 22, 2009
not if there a lender involved. The HUD 1 statement must account for all money.
0 votes
Search Advice
Ask our community a question

Email me when…

Learn more