Offer buyer the extra 20K loan they need to buy our house?

BelfastBoundJuly 28, 2014

Buyer is approved for "x". Does that mean "x" is their mortgage or "x" is the amount they can pay?

We would like to get x + 20K. What stories have you heard about offering a small amount of seller financing?

Buyer has long time employment with major accounting firm.

Thanks to all who take the time to share their knowledge.

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marie_ndcal

What does your agent say? Personally, I would NOT give anything to the person. If they cannot afford it , they need to either make a counter offer or look for something they can afford. You may never get your money back.

    Bookmark   July 28, 2014 at 10:08AM
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Acadiafun

Is this a pre-approval letter? The banks will give you a pre-approval letter for what you ask for even if you are qualified for much more. For example my lender would have given us twice the loan amount we needed, but we did not want to spend that much on a house, and did not want to go into negotiating a price with our seller with them seeing that we could "afford" much more.

    Bookmark   July 28, 2014 at 10:11AM
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lazy_gardens

If you loan them "X" ... that increases their indebtedness, and REDUCES the amount the bank will loan.

If you do it "off the books", it's loan fraud.

    Bookmark   July 28, 2014 at 10:16AM
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kirkhall

Don't play this game. You won't win. Counter what you need to counter irregardless of what their letter says. They will figure it out, or they won't.

    Bookmark   July 28, 2014 at 10:47AM
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azmom

Years ago we offered the buyer an one-year loan for a part of the purchase since the buyer would have that amount came in after one year. It saved them some loan origination fee, and got a better borrowing rate than bank offered. It earned us more than the rate of one year-CD in the bank. The buyer was well qualified for the home.

The agents and lawyers took care of the paper work and we moved out of state. When one year was up, we received the entire principle and interest on time.

Another thought:
In general, a business transaction is tied to Price and Term. It does not need to be a game playing win-lose situation. It is best to find a win-win solution for both sides.

You need to understand your own needs first, such as how marketable is your house? how long would you want to wait in finding another buyer? how trustworthy the loan would be? What is your (and your spouse's) risk tolerate level ? What is the opportunity cost to you when giving this loan...etc. As long as you know what you are doing, you should be able to make a good decision.

This post was edited by azmom on Mon, Jul 28, 14 at 11:21

    Bookmark   July 28, 2014 at 10:54AM
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azmom

Delete duplicate posting

This post was edited by azmom on Mon, Jul 28, 14 at 11:22

    Bookmark   July 28, 2014 at 11:18AM
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pixie_lou

The letter from my mortgage typically says I am approved for $x purchase price with mortgage for $0.8x. My mortgage guy would generate a new letter every time I made an offer on a house. Using my offer amount for x. It didn't matter the sellers asking price, my letter would say x. If I countered and upped my x, my mortgage would generate the letter with my new offer price. The seller never new the upper limit of what I was capable of borrowing, and never nknew until P&S time how much cash we were bringing to the table.

So counter offer. And if your buyer ups their price, ask for a new letter confirming the higher price.

    Bookmark   July 28, 2014 at 11:49AM
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zzackey

When we bought our land for our second house in Florida the man held the mortgage. He paid taxes on it. He even gave us a paper telling us the scale of interest we were paying. Very professional. We were very honest and never missed a payment. That doesn't mean it could work for you. I wouldn't want to try and collect from them if they renege. We signed an agreement if we missed so many payments ( I forget the number) the property would revert back to his ownership.

    Bookmark   July 28, 2014 at 11:58AM
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kirkhall

Lazygardens has it right, folks. In todays lending environment, the banks know every loan out there. They will not allow a second loan without a lot of extra paperwork (if they allow one at all), and *if* they do allow one, they will require you to be "second" of record. Such that, if the house has finance issues (shortsale/foreclosure/bankruptcy) the bank will be first in line to get their whole value back before you ever see a cent that was owed to you.

I just plain wouldn't do it.

Counter what you need. See if their letter miraculously has a higher "x" value (as posted above). In my experience, that is also common. (no reason for the buyer to show their full hand to the seller).

    Bookmark   July 28, 2014 at 8:02PM
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ncrealestateguy

What Lazy Gardens and Kirkhall say.
You will not find a lender that will allow a seller to loan the buyer funds, especially $20,000. The lender WILL find out too. I just had a buyer get a "gift" from her fiancée of $4000 which was fine. one week before closing, the lender found out that the gift came from the fiancée's credit card as a cash advance. Deal dead...

    Bookmark   July 28, 2014 at 8:48PM
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zzackey

Sorry! I didn't know the lender's rules. We dealt with the owner only.

    Bookmark   July 28, 2014 at 9:08PM
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