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#460094 - 12/15/17 12:17 AM Buyer offers to pay cash outside of purchase contract
Alwayslearning Offline
Junior Member

Registered: 12/14/17
Posts: 2
Loc: California
Hi,
I have a scenero that i could use your inputs and your opinions.
Seller made a counter offer selling home for $500,000. Buyer's agent said that buyer offers $490,000 and buyer wants to put $450,000 on a purchase contract and pays $40,000 cash. The money will be in escrow and will disburse to seller once escrow is closed. I would like a straight forward transaction black and white, but I want to hear your side if you can help. What is your opinion on this? Does it happen often in real estate? Is it worth the risk of losing the $40,000 or going through the hassels if both parties disagreed on something in the end? Your inputs are appreciated.

Alwayslearning

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#460095 - 12/15/17 04:39 AM Re: Buyer offers to pay cash outside of purchase contract [Re: Alwayslearning]
Vermont Offline
Major Contributor

Registered: 04/12/08
Posts: 7869
Loc: Vermont's North-East Kingdom
Sounds like he's suggesting a basic violation of RESPA (the 1974 Real Estate Settlement Procedures Act) and if you cooperate, you'll also be conspiring with him to commit a Fraud.

What's his motivation . . . . and what does his Attorney think about it, and what does your Broker think ?

Everything financially associated with the Transaction will have to be shown on the HUD-1. Knowingly signing the HUD Closing Statement when it doesn't represent the entire Transaction would be an act of Perjury which is a Felony in itself.

If your Buyer were a bit more sophisticated, he may not have even proposed this. You should educate yourself on RESPA and maybe you can explain it to him, or better yet . . . . have him pay his Attorney to keep him out of trouble. And he'll probably resent the person who informs him that he's not the wheeler dealer that he thinks he is, so watch out.

I'm not on his "side" !
_________________________
Dale C. Hittle of GOLDEN RULE PROPERTIES in Glover, Vermont
Where We're Always Striving To Put Together "THE FAIR DEAL"

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#460096 - 12/15/17 05:49 AM Re: Buyer offers to pay cash outside of purchase contract [Re: Alwayslearning]
Long Walk Offline
Member

Registered: 06/27/08
Posts: 309
Loc: New Hampshire
Hi, Alwayslearning -- welcome to the site.

What is the buyer's motivation for putting $40K in escrow, that is outside the contract (if I am understanding you correctly)?

The only possible motivations that I could see would be possibly reducing any transfer taxes and possibly reducing the enrolled assessment by 10%. My understanding of CA real property tax rates is that the rates are low enough for there to be almost no achieved benefit to this, but I could be very wrong.

Am I right in thinking that the buyer is represented by a licensed agent?

All I see is risk to both parties with no benefit to either. And I agree with Vermont's cautions about fraud.

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#460099 - 12/15/17 06:31 AM Re: Buyer offers to pay cash outside of purchase contract [Re: Alwayslearning]
Bigtoe Offline
Major Contributor

Registered: 10/14/07
Posts: 2273
Loc: Outer Banks
Is the 40k going to be in small unmarked bills?
_________________________
Your Outer Banks real estate agent. Helping people buy and sell OBX real estate since 1989.

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#460167 - 12/22/17 05:20 PM Re: Buyer offers to pay cash outside of purchase contract [Re: Alwayslearning]
Alwayslearning Offline
Junior Member

Registered: 12/14/17
Posts: 2
Loc: California
Thank you everyone for your advice and inputs. As you all have said, I told the homeowners that I was comfortable and advised them not to do it. They listened. Happy holidays everyone.

Warm Regards,
Alwayslearning

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#460174 - 12/27/17 03:43 AM Re: Buyer offers to pay cash outside of purchase contract [Re: Alwayslearning]
Long Walk Offline
Member

Registered: 06/27/08
Posts: 309
Loc: New Hampshire
Good job, Always! Not every agent would have gone to the extra effort to protect their client.

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#461534 - 05/24/18 09:00 PM Re: Buyer offers to pay cash outside of purchase contract [Re: Alwayslearning]
Brian Paul Offline
Member

Registered: 08/30/16
Posts: 23
Loc: California
Only legal way I could see this going is this example:

We sometimes sell furnished homes and the home sell for say $450K as in your scenario, and the $40K is for a legitimate purchase of the furniture and appliances, a boat or a boat dock or any other items that are all considered personal property.



Edited by Brian Paul (05/24/18 09:01 PM)

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#461541 - 05/25/18 06:33 AM Re: Buyer offers to pay cash outside of purchase contract [Re: Alwayslearning]
Roadfrontage Offline
Member

Registered: 03/28/16
Posts: 13
Loc: PA
There is a few missing pieces of information, but it reads as if the buyer had qualified for a loan of $450,000, but had access to additional funds, additional funds that the lender would not allow to be part of the transaction.

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