Buyer willing to pay above appraisal, lender issues.

[Andrew O.]

A restaurant owner is looking to buy one of our flips, bank appraised at $200,000, we are asking $230,000 and buyer is happy to pay $230,000. The extra cash the buyer wants to bring to the table is from the restaurant, and the bank is dubious about the means used to extract the money from the business.

I'm not getting into the ethics of this, because I don't know whether the funds are dubious or not. But is there a way for the buyer to pay above the appraised amount if the bank isn't cooperative.

Does the bank legitimately have a position to question the source of funds?

Should we simply sell at $200,000 and create a 2nd for the $30,000 payable immediately? Or will the bank balk at this? This seems like a simple problem to have, suggestions?

Andrew

[Lynn McGeein]

On a recent purchase, our lender questioned source of funds that paid off a loan 2 years before! So, yes, they seem to be very picky about source of funds. I did not even have an account at that bank anymore. Luckily, I had the old paper statements and wire transfer receipts. The bank may have reasons like feeling it would be detrimental to the business to withdraw that amount from operational funds for the business or it might ruin the reserve requirements. It could be as simple as the buyer didn't disclose those available funds when applying so the bank just needs documentation that it's from a legitimate source before they approve it. I do know creating a 2nd will create its own issues as the bank will most likely not accept those terms, at least not without re-qualifying the buyer using both payments toward the debt-to-income ratios, even if it is to be paid off.