Re: Why would a buyer offer more than asking price?

I agree that the entire deal must be disclosed to the lender in writing, or you could be complicit in a fraud on the lender.

A few years ago, even full disclosure to the lender wouldn't necessarily kill the deal, because the lenders were willing to be complicit in the fraudulent window-dressing, which was really to make the deal look good to regulators and upstream sources of lendable cash. Nowadays, lenders are under much tougher scrutiny from their funds suppliers and regulators alike.

What may be happening here is your buyer is a speculator who thinks the market is about to turn around, so wants to tie up as many properties as possible with little or no cash. If the market turns around this summer, as a sign or two hints, he makes a killing. If not, they allow the townhouse to be foreclosed and walk away.

I think your capital gain (or loss)would be figured on $150,000 minus your cost basis, but I am not a tax expert.

Re: Why would a buyer offer more than asking price?

YOu are asking for legal advice that can not be given without reviewing the paperwork. Consult a lawyer. It won't cost much.

Re: Why would a buyer offer more than asking price?

I may not understand your question but as I read it the offer is really $2,000 less than the listing price. The buyer increased the purchase price by $7.000 and is asking that you pay $9,000 of his costs. The other answers addressed the legal aspects, this answer addresses only the money flow.

Re: Why would a buyer offer more than asking price?

You say sure, as long as you truthfully disclose the terms of the deal to your lender. You'll never hear from the buyer again.

Re: Why would a buyer offer more than asking price?

As to "why" the Buyer would want to structure the deal in this way, here is a possible explanation: The buyer simply doesn't have the cash.

Normally, the Buyer needs to have enough cash to make their down payment and pay their closing costs. Essentially, the Buyer here seeks to have you put up the cash (for the Buyer's down payment and closing costs), which, in effect, causes the Buyer to borrow more. At the end of the day, the Buyer will have borrowed the $9,000 for down payment and closing costs and will be able to spread payment for that $9,000 over the life of the loan (as opposed to coming up with it up front, as is normally required).

As Mr. Stone notes in his response, this borrowing arrangment is not going to fly with the lender, so you will probably have no Buyer once the lender is made aware of this arrangement.