I am asked questions about real estate and the market almost every day.
Yesterday, the question came from my mailman, who knows that I'm in the business.
He was concerned because a friend told him that a relative of his was offering a higher than list price for a property located in a nearby buyer's market. The buyer had made a private agreement with the seller to credit him $10,000 at closing. My mailman wanted to know if this person could get in trouble for doing this.
My answer was "yes!" Unless this credit was documented in the contract and approved by the lender, it could constitute fraud. Attorney Oliver Frascona warns that homeowners should avoid getting tangled in the buyer's attempt to defraud the lender.
Any concessions paid to the buyer, such a gifts or economic incentives, must be disclosed to the lender and properly documented in the HUD1 closing statement...no oral side agreements or "buried" addenda.
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