Cash Back Real Estate... Legal or not?

The short answer: It depends.

Grrr... doesn't that just drive you nuts? But let me give you an example to explain further. This is an important one because there are probably a lot of sellers out there right now that are getting offered these deals and without knowing any better might be tempted to accept them.

Example: The buyer makes an offer at way over asking price. The offer looks legitimate. The buyer has attached a copy of the check for a good faith deposit. 30 day close. Great! But then attached to the back of the offer is an addendum and this addendum states that the seller is to pay the buyer (or an appointed contractor) a certain amount of money to fix the bathroom, or repair the kitchen.

Seem harmless? Well, it shouldn't. And your Realtor will probably know. The problem is, the lender might never see the addendum. And the contractor might be getting paid for just the "service" of using his name.

So how do you combat this?

First of all, if the buyer is asking for anything more than 3 - 6% of the purchase price back, feel free to reject the offer because no lender will allow that.

Secondly, if the buyer still insists that the lender will accept the transaction this way, make sure you talk to the buyer's agent (or make sure your agent talks to the buyer's agent) and ensures that the addendum gets to the lender.

Another way you can do that is to have all parties sign a disclosure stating that the certain amount of money is exchanging hands and that the lender must approve the funds.

If the lender approves it, you're off the hook. (But chances are, he will not.)

If not, remember that you don't abdicate responsibility on the sale of your house just because you hired a Realtor, you just assume a little lesser of it. Pay attention when selling your home.

The most important piece of advice - make sure ALL amounts of money are disclosed on the first page of the Purchase Agreement. And don't allow any exceptions.