Monday, December 03, 2007

I received this question via e-mail. What are your thoughts?

I am hopeful you are able to provide some direction.
We just closed on a house in PA. Here’s a quick recap of the situation:
Sellers needed to pay about $2500 for repairs to bring property “to code.”
Our mortgage lender said there couldn’t be any type of credit on the settlement statement for repairs.
We asked for that $2500 to be taken off the selling price of the house. Our agent told us the $2500 couldn’t be taken off the selling price (later, after talking with our mortgage lender the lender stated this is not true).
Our agent told us the $2500 would be handled “behind the scenes” by not charging the total amount of taxes to us that would have typically been required to pay back to the seller. Therefore the amount of taxes recorded on the settlement statement are less the $2500.

Here's my opinion. I just wish everyone would have been up front and clear about the options. The Realtor had an obligation to adjust to consider adjusting the sale price if that is what the buyer wanted to do. The seller could have said no, but at least the parties would have discussed it.

I am leery when anyone suggests doing something "behind the scenes" as they are most typically suggesting mortgage fraud.

So my question now is - - can the HUD be adjusted to reflect the true charge of the taxes? We owe them for the taxes they paid – and they owe us for the repairs. The money is basically a wash - - - except for how it impacts us when we file our income taxes and itemize our deductions. In that situation the $2500 that we will truly outlay does have a financial impact for us.
Thank you for your time.

If what you are saying is that you owe the seller taxes "off HUD", then a fraud has been perpetrated on the mortgage lender. You may wish to consult an attorney.

The so-called professionals you relied upon lead you astray.


Renee Kovacs, NSA/UNAA said...

These kinds of things - the very things that go on all day long - are a real sad commentary. Just to do this (which I seriously doubt any of those involved really felt in their HEARTS that they were liars, cheaters, or ethically challenged)required the agreement of:
the buyers (sorry, but you played the game, too! You're just first to be bitten by it.)
the sellers
both real estate agents
the title agent
the mtg broker/L.O.
the lender (who would've approved the Hud and read the contract and KNEW the prorations were off)

That's a crowded room. EVERY problem has a solution that's ethical, correct, and above-board.

Diane Cipa, The Closing Specialists® said...

All it would take is ONE person who isn't willing to fudge to make a transaction right. This entire situation likely could have been handled with an above board sale price reduction or seller assist for closing costs OR they could have done the work and paid he constractor for it prior to closing.

Peter said...

You can rationalize it any way you want but all you did was agree with the seller that he (she) would forego the pro rata credit on the taxes in return for you accepting the house without the repair. Unfortunately, you appear not to have considered the tax implications before agreeing.