Cash Back at Closing Scams
Cash Back at Closing:
Appealing Arrangement or Sinister Scam
by Ralph Roberts
Cash back deals are stitched into the very fabric of the U.S. economy. Manufacturers promote their products with cash rebates. Credit card companies offer cash-back on purchases. Even banks dangle cash-back deals to attract new customers. Now, home buyers and con artists are jumping on the cash-back bandwagon, and plenty of our own people -- real estate professionals -- are tripping over themselves to cater to them.
On its surface, cash back at closing seems like a win-win situation. The buyer simply pays a little more for a property than it's worth, and the seller agrees to kick back the surplus cash to the buyer.
For buyers, it can be a savvy financial move, allowing them to pay off outstanding credit card debt or use the extra cash for home repairs and renovations. The seller unloads his house at close to or better than his asking price. The real estate agent gets a bigger commission. The loan officer chalks up another successful loan. And the lender scores a larger loan and stands to earn more interest over the life of the loan. If anything seemed like a win-win situation, cash back at closing is it!
Unfortunately, as with most deals that seem too good to be true, cash back at closing schemes are just another way of scamming someone -- in this case, the lender, who's fooled into making a risky loan.
But lenders aren't the only losers. Buyers are often tricked into buying more house than they can afford. Housing values in the area are artificially inflated, making housing less affordable and raising property taxes. Honest real estate agents lose business to dishonest agents who offer cash back deals. And neighborhoods begin to buckle when homeowners default on the inflated loans and their properties end up in foreclosure. Perhaps that's why cash back at closing schemes are illegal.
Illegal?! Yep.
Read more at http://tinyurl.com/ozb4o
Appealing Arrangement or Sinister Scam
by Ralph Roberts
Cash back deals are stitched into the very fabric of the U.S. economy. Manufacturers promote their products with cash rebates. Credit card companies offer cash-back on purchases. Even banks dangle cash-back deals to attract new customers. Now, home buyers and con artists are jumping on the cash-back bandwagon, and plenty of our own people -- real estate professionals -- are tripping over themselves to cater to them.
On its surface, cash back at closing seems like a win-win situation. The buyer simply pays a little more for a property than it's worth, and the seller agrees to kick back the surplus cash to the buyer.
For buyers, it can be a savvy financial move, allowing them to pay off outstanding credit card debt or use the extra cash for home repairs and renovations. The seller unloads his house at close to or better than his asking price. The real estate agent gets a bigger commission. The loan officer chalks up another successful loan. And the lender scores a larger loan and stands to earn more interest over the life of the loan. If anything seemed like a win-win situation, cash back at closing is it!
Unfortunately, as with most deals that seem too good to be true, cash back at closing schemes are just another way of scamming someone -- in this case, the lender, who's fooled into making a risky loan.
But lenders aren't the only losers. Buyers are often tricked into buying more house than they can afford. Housing values in the area are artificially inflated, making housing less affordable and raising property taxes. Honest real estate agents lose business to dishonest agents who offer cash back deals. And neighborhoods begin to buckle when homeowners default on the inflated loans and their properties end up in foreclosure. Perhaps that's why cash back at closing schemes are illegal.
Illegal?! Yep.
Read more at http://tinyurl.com/ozb4o
posted by Dan Forbes at
2:37 PM
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