Here is a Cash-back Scenario"
- Homeowner lists home for $320K
- Buyer approaches seller and offers to pay$400K and ask for $80K extra paid back to the buyer after and outside the escrow.
- Seller agrees as still receives the $320K net they had hoped
- Buyer is able to put down 20% on $400K ($80K) and receive a 30-year fixed mortgage with no PMI (private mortgage insurance)
- Buyer then receives the $80K back after the close of escrow; thus, getting a fixed rate, no PMI mortgage with no money down.
- other situations are buyers putting down $40K and getting $40K cash back in the buyer's pocket.
- Buyers are committing fraud.
- Buyers and sellers are inflating home prices which as the recorded sale becomes a ‘Comp'.
- Houses usually go into foreclosure further hurting the housing market.
- Banks and shareholders take the losses.
- Losses are passed on to fair dealing consumers in higher rates and fees and stricter lending guidelines.
- All of these prevent buying; Lack of buying causes prices to fall or prevent recovery.
The Land ‘Gold-rush' in Phoenix of the last 10 years saw the unfortunate proliferation of many unscrupulous brokers , appraisers, mortgage brokers, buyers and sellers who participated in cash-back schemes which hurt the honest majority and contributed to the large amount of foreclosures in metro Phoenix and many of the surrounding towns including Scottsdale, Tempe, Peoria, Gilbert, etc...
If you are approached with such a cash back deal or know of participants email: firstname.lastname@example.org
Thanks for helping the 99% who are contributing to your housing market and national economy.