If it looks like a rat, and smells like a rat....

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If it looks like a rat, and smells like a rat....

John West
Investor · Bath, ME · Member since 2017 · 97 posts · 29 votes

... its probably a rat, I know, but I want to know if the offer I have received is legally possible.

I want to sell a property to a tenant, but he doesn't have much for a down payment. He has contacted every lender/realtor in the state I think trying to finance this property. A realtor called me today to make me an offer. According to the realtor, this transaction has been approved by the hard money lender and title company already.

I have set a firm price at $100k, which is a good deal for the buyer, but I'd like the quick sale.

Here comes the sketchy part: They would like me to accept payment of $125k with $25k being commission for the realtor, which the realtor is then going to use to pay the down payment. 

Is this even legal?

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Matthew Paul
Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
8y

What does it smell like ?     ( if there is a gain you now have to pay more taxes too)

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  • Matthew Paul
    Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
    8y

    What does it smell like ?     ( if there is a gain you now have to pay more taxes too)

    1Reply
  • Thomas S.
    Member since 2016 · 13k+ posts · 12k+ votes
    8y

    If it sounds too good to be true it is probably illegal. What they are suggesting is mortgage fraud.

    0Reply
  • Account Closed
    Lender · Los Angeles, CA · Member since 2015 · 399 posts · 174 votes
    8y

    If there's an appraisal it might very well come back lower than 125k and kill the deal.  If there is something fishy between lender/borrower/agent it's not your problem.  Hard money lenders don't usually do consumer loans because of the huge compliance required, that's kind of strange.  If it's really worth 125k I would ask why you are selling it so low.  If it's not worth 125k I would say lender won't be in business much longer.  I don't think I've ever seen a sales commission of 25%.

    I saw this same scenario played out recently.  This property was worth $3mil.  Agent said no problem we have an appraiser the will appraise at $5mil.  Seller went to attorney asking if he was doing anything wrong, attorney said no.  Agent/Lender/Appraiser/buyer maybe, but not seller.

    So they sealed the deal and went to closing, who knows what happened after that exactly but the closing date kept moving out month after month, the deal never closed. I think the agent went all over town trying to find a stupid lender but couldn't find one. The only thing I heard is the lender they had lined up saw in the MLS before they could delist that it was listed at at $3mil and said no.

    The lender could be using other peoples money, split that 25% commission with the agent, investors are hung out to dry, lender-broker say oh well that happens sometimes.

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  • Frankie Woods
    Investor · Arlington, VA · Member since 2012 · 1k+ posts · 491 votes
    8y

    I would move on.  You can always talk to an attorney, but this doesn't seem worth the risk.

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  • John West
    OP
    Investor · Bath, ME · Member since 2017 · 97 posts · 29 votes
    8y

    @Account Closed I agree. I’m more less curious if what they’re doing is illegal. 

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  • Stephanie MedellinBusiness Member
    Mortgage Broker · CA · Member since 2014 · 1k+ posts · 644 votes
    8y

    @John West  It's sketchy that you would have to call the additional $25k "commission" if it's really being used for the down payment.  If the lender was willing to lend 100% of the purchase price, you wouldn't have to circumvent that by having the realtor credit the buyer 25k.  

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    Stephanie Medellin, Loan Factory58 Reviews
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