I recently got an email from a close friend of mine, that goes something like this:
We're looking to sell our rental house and buy a new one. We found one we like, but the housing market is very hot right now and it's not likely to be on the market for long. Unfortunately, the last tenants kind of trashed the old place, and we won't be able to sell it until completing some repairs that will take a while.
We'd like to make a contingency offer on the new house, where the purchase is contingent on the sale of the old one going through, but to make it work we'd need to be able to put down a bigger down payment than we can afford at the moment. If you can kick in $$$$ to help us with the down payment, we would be able to return it, plus 15%, when the sale of our house closes. It would have to be made as a "gift", and then the return would be a "gift" back to you, because you're not allowed to use a loan for a down payment.
First and foremost, before anyone says anything, there is a 0% chance that this is a scam or an attempt to bilk me out of money. I know these people well enough, and know enough about their home life, to know that they're trying to do exactly what they say they're trying to do and the offer is in earnest.
The part that has me worried is the last bit. If I go through with it, is it going to look like some sort of scheme to evade taxes or skirt regulations and end up with me and/or my friends getting in trouble with the law?
(All proposed transactions are taking place in the USA. Not sure if this or Law.SE would be a better place to post the question.)
EDIT: A few answers so far have focused on potential mortgage problems. Just to clarify, the plan is to sell house #1 and "roll it over", using the money to buy house #2. As far as I know there won't actually be a mortgage involved.