Buyer Rebate
This form of fraud occurs when a seller, without informing the lender rebates funds back to the buyer.
Scenario: A Buyer and Seller sign a Contract of Sale providing for a $200,000 sales price ($20,000 cash down payment and $180,000 third party financing). The lender approves a $180,000 loan at 5.75% interest rate based on the Buyer's credit history and a 10% cash down payment. The agent is told that after closing the seller intends to "rebate" $20,000 back to Buyer. The lender has no idea that the Seller intends to "Rebate" a portion of the price back to the Buyer.
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What went wrong? 1. The new effective sales price is $180,000 and not the $200,000. 2. This loan is essentially a 100% loan with the $20,000 rebate. 3. The lender would not have approved the 5.75% on a 100% loan. 4. The lender did not intend for the Buyer to "pocket" $20,000 of the loan proceeds. 5. The Buyer obtained the loan my means of false or fraudulent pretenses.
Red Flags to look for: "Rebates" on sales price or broker's fee Any agreement to be performed "outside or after closing"
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