|Cash at Closing.
A close-up look at ways to get cash back at closing
Tim and Roy Stitely, an enthusiastic father-and-son team from the Washington, D.C. area,
have their buying formula down pat. They don't close a deal unless they walk away with cash - a lot
of cash - in their pockets.
The Stitelys buy property from an investor who renovates row houses and quickly flips
them for a modest profit. In addition to the amount the investor pockets at the end of closing, he pays
the Stitelys a $5,000 rebate as well as $5,000 for closing costs.
For example, in one transaction, the Stitelys borrowed $39,000 from the bank for a property
appraised at $50,700. The contract specified that the investor receive $29,000 and the Stitelys receive
$5,000 cash and $5,000 toward closing costs.
That means a quick profit for the seller, who picks up the fixer-uppers for between
$5,000 and $15,000.
For the Stitelys, it means cash back at closing - and it's a lot easier to do than you
might think. "It gets the deal done for the seller, and we actually come out with $5,000,"
Negotiate with sellers
There are a number of ways buyers can leave the closing table with more money than they
walked in with. The two critical ingredients are these: finding the right sellers and not being afraid
to negotiate for cash back.
If you think the sellers might entertain a cash-back offer in order to move their
property, then ask. All they can do is say no.
For example, you could offer to buy a $100,000 property that needs $10,000 work if the
seller rebates you the $10,000 at closing. Often the work won't cost as much as anticipated, and you
can keep the difference.
One investor included in her offer a provision for $1,000 cash back from the seller to
cover unspecified "one-time non-recurring costs." The seller was happy to agree to the
provision in order to clinch the deal. The buyer wisely avoided some of the anticipated repair costs
and was able to keep the amount not spent.
Very motivated sellers - those just a step away from foreclosure, for example - may flat
out pay you to buy their property, especially if they have little equity in it. In such cases, you
could offer to buy it for the amount of the mortgage and have them pay all closing costs. It could be
worth it to the seller to get out from under a problem. Remember - the key to making a successful
play for cash at closing is to ask. Negotiating with motivated sellers could mean money in your
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