BIC TIP #1293: No Side Deals

The deal is almost done, the numbers are a little off, and somebody suggests the seller just write the buyer a check at closing. Stephen Long, your Notorious BIC, has a one-word answer: no. When there is a mortgage loan involved, any money exchanged as part of the transaction belongs on the closing disclosure. No side deals.

If It Is Part of the Deal, It Is on the Paper

When a buyer and seller need to exchange money as part of a real estate transaction, it cannot happen outside of closing. If a lender is involved, the closing disclosure is meant to reflect the full financial picture of the deal, and the lender is relying on that picture.

Money moving quietly between the parties, outside the closing statement, undermines that. It does not matter how small or how friendly the arrangement seems.

The Classic Example

Stephen describes a situation brokers see regularly. The buyer asked for more seller-paid closing costs than they can actually use. Now they want the seller to just write them a check at closing for the leftover amount, or leave some cash at the house. You cannot do that.

Unused seller concessions do not turn into a cash gift on the side. If the numbers need to change, they need to change properly, through the contract and on the closing disclosure, with the lender in the loop.

Why Brokers Should Care

Brokers are often the first to hear about these ideas, sometimes casually. Do not go along with them, and do not help arrange them. Steer the conversation back to the lender and the closing attorney, who can explain what is allowed and how it must be documented.

If you are not sure whether something needs to be disclosed, ask your broker-in-charge or the closing attorney before closing, not after.

The Practical Takeaway

Any time money is being exchanged in a financed real estate transaction, it should appear on the closing disclosure. No checks at the closing table, no envelopes on the kitchen counter, no side deals. Keep everything transparent, keep the lender informed, and keep yourself out of trouble.