Cash back at closing??

Question

So we have an appraisal going on a house right now and we might be making an offer on a house next week. My question is, how often does a seller agree to cash back at closing? We are thinking we are getting the property for 10-20k under what the appraisal will be. Do we just offer 10k more than asking, and request 10k back at closing? Does this work? What type of options do I have? Any input is helpful!

Thanks!
DJ Cummins

Account Closed · Answer

Cash back at close with traditional lender financing is illegal. No matter who you are buying from. You can not offer more than the property is worth and go to the bank and expect them to make a loan. They will not do it. Now what about if you are purchasing the property for considerably less than the current value?

DJ Cummins · Answer

I am thinking just putting my 20% down and then using the 10-15k in equity on the next property.   Pretty much the same way of doing it.

Andreas W. · Answer

In your case, the lender will be the bottle neck if you friend is a good friend. In other cases, the market decides. In my sellers market a cash back offer lands on the bottom of the pile.

DJ Cummins · Answer

haha.   Good call @Steve Babiak .  I guess its just as easy to take out that 15k of equity for our next purchase.  This is our first deal and just wanting to be set ourselves up as best as possible for the next purchase.  We were planning on buying a multi but are fetting a good deal so we thought we would jump on this cheaper property first.

Steve Babiak · Answer

I'm sure you'll stay really good friends after that ;)

DJ Cummins · Answer

In this case, we are buying from a friend.  I was thinking about asking her to give me that 10k after we close.   Is that unheard of?

Nathan Brooks · Answer

Or you could ask the seller to carry a second on the back of the property if they were willing ... but I agree with @Wayne Brooks ... dealing with traditional financing and the banks will not allow more than whatever they allow for closing costs or potentially repairs depending on who is paying for them and doing the work.

Jay Whitfield · Answer

In some cases you can request a paint or carpet credit. Something to be repaired, just don't ask for cash back. I got a check to repair a stairs to a rental I bought. So you have to find something that needs updated or repaired. Good luck.

Jay

Wayne Brooks · Answer

Your lender can tell you what the maximum allowable "cash back" from seller that goes toward your closing costs can be.  Typically 3%, but it can vary, and for closing costs only.