Question: Cash Back at Closing
My buyer wants cash back at closing to renovate the property, which is fine by me because he's willing to pay me the difference in my tax liability. My question is how do I correctly and LEGALLY write it up into the purchase agreement so that I'm not committing fraud? Thanks.
How much does he want and how much are you willing to give back?
There are several ways to satisfy your buyer:
•1. Give the buyer a check that will be due at a future date after the formal settlement. This could be consideration for completing needed work or reimbursement for closing cost.
•2. The buyer can write a clause in the offer that states that the seller agrees to give the buyer $10,000 at time of settlement to complete the following deferred maintenances.....
•3. Buyer can offer to paint the front porch (Called a "front porch clause") for $10,000, seller writes a check for $10,000 payable to buyer, and buyer endorses the check back to seller as a downpayment on the property. You should retain a photo copy of the check as proof of consideration.
You never want to do anything that is gray, marginal or could be interpreted as illegal.
There are many formulas that can be used to structure transactions legally and creatively; never do anything that is contrary to the law. Always make full disclosures early in your negotiations and keep your word.