Investment Single Family Home - We signed a contract with the builder 6 months ago for $640K, 1638 sqft in Folsom Ranch with closing in early September. The interest rates since signing the contract have shot up drastically.
30 years fix, 20% down it will be -$900 per month negative cash flow.
6 months / 6 months SOFR AMR at 3% rate, 20% down it will be -$200 per month negative cash flow. This loan has a 5% rate cap; that will take the negative cash flow to -$800 per month.
Based on current market conditions I am thinking of backing out. Any thoughts on what I should do.
Investment Single Family Home - We signed a contract with the builder 6 months ago for $640K, 1638 sqft in Folsom Ranch with closing in early September. The interest rates since signing the contract have shot up drastically.
30 years fix, 20% down it will be -$900 per month negative cash flow.
6 months / 6 months SOFR AMR at 3% rate, 20% down it will be -$200 per month negative cash flow. This loan has a 5% rate cap; that will take the negative cash flow to -$800 per month.
Based on current market conditions I am thinking of backing out. Any thoughts on what I should do.
If the numbers don't workout get out of the contract if you can. Speak with your Realtor to figure out options etc. Also, your loan officer knew this property wouldn't be closing for 6 months so it's too bad they didn't lock the rate accordingly.
Investment Single Family Home - We signed a contract with the builder 6 months ago for $640K, 1638 sqft in Folsom Ranch with closing in early September. The interest rates since signing the contract have shot up drastically.
30 years fix, 20% down it will be -$900 per month negative cash flow.
6 months / 6 months SOFR AMR at 3% rate, 20% down it will be -$200 per month negative cash flow. This loan has a 5% rate cap; that will take the negative cash flow to -$800 per month.
Based on current market conditions I am thinking of backing out. Any thoughts on what I should do.
If the numbers don't workout get out of the contract if you can. Speak with your Realtor to figure out options etc. Also, your loan officer knew this property wouldn't be closing for 6 months so it's too bad they didn't lock the rate accordingly.
Investment Single Family Home - We signed a contract with the builder 6 months ago for $640K, 1638 sqft in Folsom Ranch with closing in early September. The interest rates since signing the contract have shot up drastically.
30 years fix, 20% down it will be -$900 per month negative cash flow.
6 months / 6 months SOFR AMR at 3% rate, 20% down it will be -$200 per month negative cash flow. This loan has a 5% rate cap; that will take the negative cash flow to -$800 per month.
Based on current market conditions I am thinking of backing out. Any thoughts on what I should do.
What comes to mind is the financing contingency.
If you cash flow -$900 perhaps the lender won't do the deal anyway.
Now, unless that 640K property somehow increased significantly in six months to where you can close, then turn around and sell it for a profit after the cost of buying and selling, I share your sentiments about not putting down over 120k to lose 11k/year
Real Estate Consultant · Seattle, WA · Member since 2022 · 1k+ posts · 784 votes
4y
What is the value of the property today vs when you signed? With new construction and PSAs being signed months or years before actual closing, you might be ahead of the market. A short term pain in terms of the impact of the increased interest might be worth it. But if the values dropped in addition to putting you into a negative cash flow position you might want to back out. What is the cancellation clause like? Run the numbers, that’ll tell you!
My purchase price will be $640K and the current price for the same model is $670K that the build sold recently.
If I walk away, I have to let go $7K.
Can you assign the contract to someone else at say $660k? You make $20k without taking possession and the buyer saves $10k on the purchase. Or some other middle ground that works for everybody. You just need to find the buyer.