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Reader’s Question: I recently sold a house and the buyer did not have enough money for closing costs. They asked me to sign papers that increased the purchase price by $ 5,000. I want to know because the buyer received $ 1,000 of my hard earned money. On closing day I hadn’t cleaned everything up so I told his lawyer I needed another day to finish. They agreed, but I figured it was midnight the next day and it was noon. I made a mistake, so legally they can do it. I want my money back the same way they took it from me.
I was out at 5 p.m. I helped him by letting it close a week earlier. I left the paint to cover the scratches and the spots where I filled in. On closing day, I showed him things about the house that weren’t obvious (like how to operate the furnace, change the water purifier filter, new windows, etc.). I signed papers to have money to close the deal (for more money than what it was sold for). I lose a lot on a technicality just because they can. I firmly believe in karma, but not for a thousand dollars. How illegal is this and is the buyer’s lawyer and / or real estate agent liable?
Response from Monty: It is not clear from the information you provided whether the transaction is illegal or not. Most mortgage lenders today sell the mortgages they produce in the secondary market. The main buyers of these mortgages are Freddie Mac and Fannie Mae. These companies are government sponsored public enterprises that help expand ownership. Large commercial banks and other corporations also buy mortgages. Then there are government agencies that also do mortgage loans. The Federal Housing Administration (FHA), the Veterans Administration (VA), and the Federal Land Bank are other examples of secondary and direct lenders.
The rules for taking out loans vary from company to company. For example, the VA loan requires the borrower or co-borrower to be a veteran, and no down payment is required.
The situation you describe is a “stakeholder contribution”. Here’s how Freddie Mac describes this franchise:
The key for you to determine is whether or not they reported your dealership to the lender. You can determine this by looking at the HUD Vendor Closing Statement you signed at the close. If they disclosed the seller’s $ 5,000 concession to the lender in the HUD closing statement, the transaction could be legal. If they did not disclose the concession to the lender, the sale could well be considered a fraud. Consider seeking further clarification from Freddie Mac fraud prevention.
Richard Montgomery is the author of “House Money – An Insider’s Secrets to Saving Thousands When You Buy or Sell a Home”. He is a real estate industry veteran who advocates reform of the sector and provides readers with unbiased real estate advice. Find it at CherMonty.com.