Buyers love the closing credits because in theory they can still borrow say 96.5% of the contract price while using the credit to lower their bottom line owed (simply they can borrower more and owe less at closing). For example, on a $100,000 purchase Buyer can borrow $96,500 and then that $2,000 repair credit would leave a Buyer needing only $1,500 to close (leaving aside other closing costs for the sake of discussion). Of course you could simply drop the purchase price to $98,000 but then Buyer’s loan amount gets lowered to $94,570 and Buyer owes more at closing versus the $2,000 closing cost credit example above (of course long term Buyer’s paying less on his loan over 30-years but sadly the issue is usually the short term matter of $$$ to close).

So that’s why Buyer’s love credits, Mo’ Money; but the flip-side for lenders is that the “credit Buyer” example above has less skin/money in the transaction and thus is viewed as the riskier borrower. And that becomes the trick, if lenders won’t let a credit be listed on the HUD-1, how do you make sure a Buyer still actually gets credit for that agreed upon contract credit at closing. The greatest challenges lies in transactions, notably FHA loans, where a Buyer can’t put too much money down yet she MUST invest 3.5% of the purchase price into the transaction.

What to do? Here are 3-4 tools to keep in your real estate closing bag of “lawyer tricks”…

1.  Hide the Credit Somewhere Else on the HUD-1. This is the easiest and the most frequently used solution and typically done in one of two ways. First, Buyer’s “closing credit” gets added into Buyer’s real estate tax reproration credit. When there’s a smallish Buyer’s credit of say $2,000 or less this is almost always the preferred solution and I’ve never seen a lender bat-an- eye.  Second, if you need to find to find a few more bucks, then some of Buyer’s costs should get moved over to the Seller’s side…mortgage interest, lender fees, etc.

2. How About a 203k loan? I’m going to write an extensive post on 203k loans upcoming…this is a HOT area right now. I think I represented one 203k Buyer over the first seven years of my legal career and have represented five 203k Buyers in the last 6 months. What is it? Simply, a Buyer can borrower more than a property’s current value in order to fund remodeling/repairs. So if you really need a big repair credit at closing, why not dial 2-0-3-K?

3. Have Seller pay Buyer’s Contractor Directly. I wouldn’t recommend this option but I did see this happen recently. Parties got to closing and Buyer’s lender wouldn’t let a large repair credit show on the HUD and Buyers couldn’t close without those dollars. Long story short, item #1 (above) was used to the point that it could be used, but a good chunk of the agreed upon credit was still outstanding. Seller ended up agreeing to quietly pay credit to Buyer’s contractor to complete the repairs…not sure about legality here but I’m just sayin’ I’ve seen it done to close a deal.

Or just don’t buy a property that you can’t afford…sometimes that’s the critical issue. If you’re squeezing for $$ too much just to close you may be asking for a disaster like here. Remember, if Buyer’s lender ostensibly won’t cooperate on this issue at closing that’s not the Seller’s problem and between Buyer/Seller if Buyer can’t close w/o the credit the Buyer likely is in a breach of contract scenario.

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Well, since there’s nothing more Chicago than a Bungalow and the Expo is free I don’t mind giving them a shout out:

October 17, 2009, 10am – 4pm, The Merchandise Mart

What is the Historic Chicago Bungalow and Green Home Expo?

The Historic Chicago Bungalow and Green Home Expo is Chicago’s largest and most popular home restoration, preservation and energy-efficient renovation expo.

Created in 2002 as the Historic Chicago Bungalow Expo and expanded in 2006 to include green home renovation resources, this event is continually evolving. Vendors and workshops address the needs of anyone looking to preserve, update, or improve energy efficiency in their home.

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That’s my sports vernacular for the popular University of Kansas chant.  KU along with Cal-Berkely were cited in this Journal piece titled, At Long Last, the Sports Mortgage, regarding financing a limited number of season tickets via so-called “equity seat rights.”

If you need to finance the purchase of tickets to sporting events you probably shouldn’t be there in the first place, right?

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1.  The worst type of property to buy…yep, condo conversions.

2.  Safety counts in open houses.

3.  Know the Multi-Board Contract, Version 4.0.

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At the heart of the three-month program is a list of participating professionals — real estate agents, home inspectors, title companies, lenders and attorneys — who are offering discounts on their services.

Also, the city has agreed to give buyers a $500 gift certificate good for use anywhere in Lake Forest, which works effectively like a rebate on the transfer tax.

Here are the specifics and everyone involved with Lake Forest Voices.

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Closing Chicago Real Estate is more about the financial side of the equation, but the lawyer-author does a really nice job of focusing on issues that a first-time buyer might face. Here’s an example:

“I represented a buyer earlier this week at a closing and we used this to sock away $5k just in case there’s a special assessment in the next six months. In my particular situation a review of condo board minutes over the last year suggested a couple big projects may be happening soon so I just wanted to protect my client. But in a soft real estate market, why not use this as the default position on the Buyer’s side. Protect your client for another year.”

This is good stuff to know if YOUR real estate agent isn’t thinking about stuff like this. Bonus points for not using legalese like ‘pursuant.’

Is pursuant legalese??

Note the other “Bests” listed:

*Your Windy City Guide;
*Chicago Metro Real Estate by Fran Bailey;
*The Chicago Real Estate Local;
*Chitownliving.com;
*The Real Estate Lounge Chicago;
*Live and Play in Chicago;
*Arc Chicago;

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