FAQ~Can I Get Cash Back at the Closing Table?

Real Estate Broker/Owner with MoonDancer Realty, Dillsboro,NC NC# 218097

One question we frequently get asked is “Can I Get Cash Back at the Closing Table?”. It’s usually a FAQ that we get late in the process and byFAQ then if the answer is NO, it can be too late to do anything about it.

Once Upon A Time…four or five years ago when the litmus test for getting a loan consisted of breath fogging a mirror…all kinds of creative things happened with your house loan. No down payment was very common and it wasn’t unusual for the closing attorney to disburse money after settlement to the seller’s lender, the seller themselves, the attorney, the real estate agents and … wait for it … the buyer! Times have changed, haven’t they?

Here’s a bizarre and weird concept, lenders don’t want you purchasing a home if you are going to need them to make change at the closing table. What’s up with that? (If I knew how to make a tongue in cheek smiley face, I would). Here’s the well guarded secret … houses can be expensive to keep up with and maybe, just maybe if you don’t have the wherewithal to maintain a house - it might not be in your best interest NOR that of the lender to purchase a house … yet.

Why do REALTORS keep pushing you to talk with lenders? It isn’t just about IF or HOW MUCH you are qualified for, the really great loan originators are going to find out if you have enough ready cash to do things like cover your moving expenses and to make upgrades or repairs if necessary to your new home. Although, truth be told…buyers should have a good grasp of this already. Along with the American Dream of owning your own house comes the responsibility of maintaining your precious investment.

If you don’t feel you have enough cash on hand to take care of more than simple repairs, looking at houses advertised as needing TLC or TO LEARN CONSTRUCTION really aren’t for you. Talk to your lender.

USDA is a great program and useful to first time homebuyers and people who are capable of making the payments but might not have the 20% down to get into their first homes. BUT, you need to know when you go through repair negotiations and the seller agrees to credit you for repairs, it may come in the form of a price reduction not ready cash. Ask the lender early on what their policies are likely to be.

So, the answer to the buyer’s FAQ “Can I Get Cash Back at the Closing Table?” can run the gamut from a flat out NO to maybe. Talk to your lender and to your REALTOR about your financial concerns above and beyond that of the purchase price. No one wants to spend time and energy on looking for a house that might turn out to be an inappropriate fit. Everyone on your real estate process team is interested in one thing only…a successful and beneficial transaction for all parties.

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Patty Da Silva, Davie, Southwest Ranches Cooper City, Plantation, Weston, REALTOR
BROKER of Green Realty Properties® - 954-667-7253 - Davie, FL
Top Listing Broker

Mona, whenever a Buyer asks that of one of our short sales, we tell them that we'll try, but we need to see the proof of funds that they can afford the closing costs and pre-paids just in case they say no. Takes a good chunk of Buyers who wouldn't be able to afford the house without those closing costs out so that we don't go through the entire process of a short sale only to find that we can't close.

Aug 02, 2012 08:52 AM #6
Mona Gersky
MoonDancer Realty, Dillsboro,NC - Sylva, NC
GRI,IMSD-Taking the mystery out of real estate.

Gene, we REALTORS probably need to do a better job of explaining all that the lender can do for them.  It really isn't only about qualifying for a price, it is so much more.

Gayle, thanks!

Tammy, the cart before the horse makes everything awkward.

Patty, that is very smart of you. Saves wear and tear on you AND the buyer.

Aug 02, 2012 12:26 PM #7
John Juarez
The Medford Real Estate Team - Fremont, CA

House needs some TLC. To some that means that the house needs a little “tender loving care”. In today’s market, for many first time buyers who are thinking that they should be looking at REO’s because their friend told them that REO’s are a “deal”, needs TLC means that the house needs toilets, lights and ceilings.

Aug 02, 2012 12:53 PM #8
Karen Anne Stone
New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX
Fort Worth Real Estate

Mona:  Four years ago it was not unusual, maybe even commonplace for my buyers to receive their earnest money refunded to them at closing.  Although there are some 100% financing possibilities around... including some local bond programs, they are few, far between, and tough to qualify for.

Aug 02, 2012 01:14 PM #9
Melissa Marro
Keller Williams First Coast Realty - The Marro Team - Orange Park, FL
Jacksonville Real Estate and Home Staging

I remember the good old days... when my husband and I bought our first home, we went VA and yes, at the  closing table got a check (plus a bottle of champagne from the Realtor). 

Times certainly have changed!

Aug 02, 2012 02:01 PM #10
Lloyd Binen
Certified Realty Services - Saratoga, CA
Silicon Valley Realtor since 1976; 408-373-4411

I guess when a buyer doesn't have a financial investment in the property it's very easy to walk.  And that's what happened.

I like your tree trunk art.

Aug 02, 2012 02:37 PM #11
Mona Gersky
MoonDancer Realty, Dillsboro,NC - Sylva, NC
GRI,IMSD-Taking the mystery out of real estate.

John, TLC=you need ToLearnConstruction! HGTV and other similar media have taught first time homebuyers to expect a house to be ready for them.  They rarely are and often the buyers aren't prepared for the expenses and work necessary to bring them up to what they think are their standards.

Karen Anne, I remember those days...not that far back.  Those are the folks who are ready to sell and move up but haven't got enough equity in the house to do anything.  They are stuck.

Melissa, times really have changed.

Lloyd, that's very true.  People think they will just wait until their credit heals before buying again.  Glad you like the tree dudes.

Aug 02, 2012 09:22 PM #12
Gary L. Waters, Broker Owner, Waters Realty of Brevard, LLC
Waters Realty of Brevard, LLC - Rockledge, FL
... a small office, delivering big service!

I love the reference to TLC... I never heard anyone say to learn construction. I will definitely borrow this one! In these times people really need to be talking with lenders a lot more than in the past.

Aug 02, 2012 10:43 PM #13
Travis "the SOLD man" Parker; Associate Broker
Team Linda Simmons, Enterprise, AL 36330 - Enterprise, AL
email: Travis@theSOLDman.me / cell: 334-494-7846

If the Seller pays Closing Costs and pre-paids, the buyer can get their earnest money back. Certain mortgage companies and agencies (USAA, etc...) also have the agents giving cash back to the buyer. I've had many walk out of a Closing with the keys and checks for almost $2,000. Good "Moving Money"! I tell them that the costs the seller "paid" for are really just factored into the price, therefore their loan, so pay extra on their principle after they have moved and any resulting potential pit-falls have passed. I feel it's better to have a little extra $$$ readily available DURING and immediately after a move "jess in case". Just MY personal opinion...

Aug 02, 2012 10:52 PM #14
Rodney Mason
On Q Financial - Atlanta, GA
FHA 203(k) & HomeStyle Renovation-AL,FL,GA,TN

Regardless of the loan program, the borrower can never get more money back at closing that they personally have invested.  Typically, that investment comes from their earnest money deposit. 

Aug 02, 2012 11:00 PM #15
George DiGregorio
Zenith Mortgage Advisors - Hopkinton, MA

As Rodney stated, you can't get back more than you put in. If it was a USDA or VA 100% financing with seller paid closing costs and the buyer had put down a deposit, they can get that deposit back. The only time there is anything even resembling "cash back" is in the event of a lender closing cost credit exceeding closing costs. In that case, some lenders will allow the excess to go towards the loan principal up to roughly $1,250. If the contract says "sellers to pay up to $5,000 towards closing costs and prepaids" and the total is only $4,000, the buyer can't get the other $1,000. It stays with the seller. This is why it is important to discuss seller concessions with the lender to make sure you aren't leaving money on the table. (or in the seller's pocket as it may be).

Aug 03, 2012 12:42 AM #16
Roger Newton
Roger Newton Real Estate - North Plains, OR

USDA is pretty picky on condition of the home and any outbuildings.  If the home needs repairs, USDA is not probably not going to do the loan unless the repairs are done prior to closing.  I had USDA turn down a property reently because there was moss on the shed roof.  Repairs are something that a home needs, like a roof or structural issue.  Cosmetics are different, and will probably be ok with USDA.

Aug 03, 2012 12:48 AM #17
Clint Mckie
Desert Sun Home, commercial Inspections - Carlsbad, NM
Desert Sun Home, Comm. Inspection 1-575-706-5586

Hi Mona,

I Have to say this is quite an excellent pot. Congrats on the Featured post.

In many cases here in New Mexico, the seller will pay the closing costs. This free's up the earnest money for a refund or return to buyer.

A nice surprise for the buyer who was probably stretched a little anyway.

On another note. There was a shout out for you today on my post. Check it out at http://actvra.in/FPz

Have a great day in Sylva, North Carolina.

Best, Clint McKie


Aug 03, 2012 12:54 AM #18
George DiGregorio
Zenith Mortgage Advisors - Hopkinton, MA

The question on everyone's mind is probably "but why can't they get cash back?"

It centers on Loan to Value. LTV is one of the most rigid and controlling facets of the loan structure. Lets say you buy a house for $100,000 and put 5% down, but the seller gives you $1,000 cash back over and above closing costs. In the eyes of the lender (and more importantly the PMI company) you have only put 4% down. You no longer have 95% LTV. If you get $1 back, you no longer have 95% LTV. Even in cases of 20% down or more, if you change the LTV, many times the loan has to be re-underwritten. If you change any figures prior to closing and it affects the APR in a negative way, the closing has to be cancelled and rescheduled to give the borrower the mandatory three day review of  any changes to the Truth in Lending document.

More info if you are really bored.  http://www.federalreserve.gov/newsevents/press/bcreg/20090508a.htm

Aug 03, 2012 01:07 AM #19
Karen Fiddler, Broker/Owner
Karen Parsons-Fiddler, Broker 949-510-2395 - Mission Viejo, CA
Orange County & Lake Arrowhead, CA (949)510-2395

Boy things were different, weren't they? I remember the carpet allowances with cash at closing, frankly...I'm not opposed to this idea with qualified buyers, but things got so out of hand, that now nothing makes sense.

Aug 03, 2012 01:14 AM #20
Bob Miller
Keller Williams Cornerstone Realty - Ocala, FL
The Ocala Dream Team

Hi Mona and we struggle getting seller to understand that we do not get lender clear to close sometimes until day before closing!

Aug 03, 2012 06:12 AM #21
Mona Gersky
MoonDancer Realty, Dillsboro,NC - Sylva, NC
GRI,IMSD-Taking the mystery out of real estate.

First....let me say I am THRILLED to have so many mortgage people chiming in...than you sooooo much.

Gary...have at it, although I have to say that John Juarez's toilets, lights and ceilings is pretty darned clever.

Travis, I'm not necessarily opposed to a buyer getting cash back, just want them to be qualified to get it.  Unfortuntately, we can't always predict if a lender will allow this to happen and it is always best to discuss this with your lender first.

Rodney, thanks.  That simplifies it a bit.  The hard part is convincing the buyer.  That's why we're delighted when they end up with lenders like you.

George, I am going to include this post and these great comments like yours in the folder that I select from to send to new homebuyers.  Thanks for the link.  I might have trouble sleeping tonight, so it will come in handy.

Karen, yes ma'am...I agree.  I really like your new photo too.

Bob, the day BEFORE!!!  how about the day OF!

Aug 03, 2012 09:50 AM #22
Bob Crane
Woodland Management Service / Woodland Real Estate, Keller Williams fox cities - Stevens Point, WI
Forestland Experts! 715-204-9671

I have been lucky these past few years, when I tell my lender that we have an accepted offer the first 2 questions he asks are, how much are you buying it for, and how much over that will you be borrowing.  Of course he knows me well enough to know that I wouldn't borrow it if the house was not worth that amount and more.

Aug 03, 2012 10:37 AM #23
Mona Gersky
MoonDancer Realty, Dillsboro,NC - Sylva, NC
GRI,IMSD-Taking the mystery out of real estate.

Hi Bob, it all boils down to open and honest conversations with the money lenders...especially nowadays.

Aug 03, 2012 11:41 AM #24
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

If you want to close on an escrow don't rock the boat.  It is hard enough without game playing.

Aug 03, 2012 01:36 PM #25
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GRI,IMSD-Taking the mystery out of real estate.
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