Is there a creative way to make a cash offer, then finance?

Investor · Cocoa Beach, FL · Member since 2015 · 132 posts · 59 votes

Curious if anyone knows a way to work around making a cash offer, but doing a double close or something to immediately finance a purchase? I'd like to use the cash offer to get the owner to the table, but get the deal financed. I could close with cash, if needed, but would prefer not to tie up all the cash and have to pay for two full closings... Any ideas?

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Darren Budahn

Investor · Milwaukee, WI · Member since 2014 · 811 posts · 420 votes

10y

Luke Grogan When writing an offer, your offer will either have a financing contingency or it won't. If you don't have the financing contingency in your offer, it will be a cash offer. Then, as long as you give yourself enough time between the accepted offer and the closing date, you can just go ahead and close with financing. If your financing falls apart, you need to be prepared to close with cash then obviously. I would be upfront with the seller about your intentions but as long as you don't have the financing contingency, he shouldn't care whether you or the bank are paying him.

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Brent Coombs
Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
10y
Leave your cash with a suitable Lender and get them to agree with your plan (preferably in writing) BEFORE making Offers! Cheers...
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Darren Budahn
Investor · Milwaukee, WI · Member since 2014 · 811 posts · 420 votes
10y
Luke Grogan When writing an offer, your offer will either have a financing contingency or it won't. If you don't have the financing contingency in your offer, it will be a cash offer. Then, as long as you give yourself enough time between the accepted offer and the closing date, you can just go ahead and close with financing. If your financing falls apart, you need to be prepared to close with cash then obviously. I would be upfront with the seller about your intentions but as long as you don't have the financing contingency, he shouldn't care whether you or the bank are paying him.
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Account Closed
Accountant · South Windsor, CT · Member since 2015 · 58 posts · 20 votes
10y
My partner and I submit two or more offers side by side if the numbers work. We have seller financing at multiple price points/balloon amounts/year terms and a conventional financing option. Hope this helps. Good luck.
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Max T.
Investor · Philadelphia, PA · Member since 2015 · 3k+ posts · 3k+ votes
10y
If you have enough equity in a property you can open up a credit line backed by that property. Then you can go make cash offers once your credit line is set up. Some banks will do credit lines on investment properties, most will only do HELOCs on primary residences.
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Mark Holencik
Investor · Coplay, PA · Member since 2015 · 404 posts · 315 votes
10y
You will not do a double closing no matter how you pay for the property. You just agree to a closing date and bring the money. Where you get the money from does not matter to the seller.
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Brent Coombs
Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
10y
Originally posted by @Mark Holencik:

You will not do a double closing no matter how you pay for the property. You just agree to a closing date and bring the money. Where you get the money from does not matter to the seller.
I believe @Luke Grogan is referring to the times when he MUST take title before reselling (in circumstances where selling property you don't own, without a License, is illegal) ie. double close!
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Luke Grogan
OP
Investor · Cocoa Beach, FL · Member since 2015 · 132 posts · 59 votes
10y
For the most part, this is referring to a seller that will not accept a financed offer. They've had it fall out of contract and are only negotiating with cash buyers. The price is $900k and I can bring about $800k. I can scrape the remaining $100k, but that puts me in a tight spot until I can refinance it. My thought was to pull everything I had together to make the proof of funds letter and then work on financing, but I'd have to close once I get past DD, I'd lose my deposit. Unfortunately, the contract could not be written to have securing financing as a legitimate reason to terminate the contract.
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Brent Coombs
Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
10y
Originally posted by @Luke Grogan:

For the most part, this is referring to a seller that will not accept a financed offer. They've had it fall out of contract and are only negotiating with cash buyers. The price is $900k and I can bring about $800k.
I can scrape the remaining $100k, but that puts me in a tight spot until I can refinance it. My thought was to pull everything I had together to make the proof of funds letter and then work on financing, but I'd have to close once I get past DD, I'd lose my deposit. Unfortunately, the contract could not be written to have securing financing as a legitimate reason to terminate the contract.
Oh. But that has nothing to do with double closing, does it (per your original post)?...
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Luke Grogan
OP
Investor · Cocoa Beach, FL · Member since 2015 · 132 posts · 59 votes
10y
Brent Coombs Yeah, I guess a double close is only when selling to another investor. I'll talk to my bank and see if I can just keep the money on deposit, make a cash offer and let them finance it at the close. Shouldn't make much difference but wondered if I needed to use any other strategy to make a cash offer and then finance it without going through a refi...
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Brent Coombs
Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
10y
So long as it immediately appraises for circa $1.3M, if you pay the $900k all cash up front, you can apply for a "Delayed Financing Exception" which should get you all your cash back (ie. 70% of appraisal) straight away. https://www.fanniemae.com/content/guide/selling/b2...
From the Sellers point of view, so long as your Lender is on board, they don't REALLY care if their money is from you or your bank at closing time - they just want their money guaranteed!
So, why not just borrow as much of a percentage as they will allow from the outset?...
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Austin Peck
Fort Lauderdale, FL · Member since 2016 · 30 posts · 12 votes
10y
Originally posted by @Account Closed:

My partner and I submit two or more offers side by side if the numbers work. We have seller financing at multiple price points/balloon amounts/year terms and a conventional financing option. Hope this helps. Good luck.
Hi Luke, how can I learn to strategically offer multiple seller financing deals? This is something that definitely interests me, but I have zero experience doing so and wouldn't know where to begin on initial numbers and also the differences between the two. Example:
$120k list price = conventional financing option
(Don't know?) $125k = seller financing option 1 (down payment? terms?)
(Don't know?) $130k = seller financing option 2 (different terms from 1? How big of a difference?)
Maybe an example of an offer you've submitted in the past would be the most helpful :)
Thanks in advance.
-AP
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Mark Holencik
Investor · Coplay, PA · Member since 2015 · 404 posts · 315 votes
10y
Originally posted by @Brent Coombs:

Originally posted by @Mark Holencik:
You will not do a double closing no matter how you pay for the property. You just agree to a closing date and bring the money. Where you get the money from does not matter to the seller.
I believe @Luke Grogan is referring to the times when he MUST take title before reselling (in circumstances where selling property you don't own, without a License, is illegal) ie. double close!
No, I understood exactly what he was saying.
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Account Closed
Accountant · South Windsor, CT · Member since 2015 · 58 posts · 20 votes
10y
Austin Peck we use our pro forma in excel to play around with numbers that both make sense for us and the seller. You can back into the seller financing number if you know how much your target profit is.
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Jeff CopelandBusiness Member
Real Estate Broker · Tampa Bay/St Petersburg, FL · Member since 2015 · 1k+ posts · 2k+ votes
10y
Since you're in Florida, I assume you're making offer using the FAR/BAR As-Is.
You can make a cash offer (assuming you have the cash and proof of funds to back it up), but still reserve the right to finance a portion of it.
As long as you have enough time to close with your lender. Other than the closing timeline (which is usually longer for financing), it really doesn't make any difference to the seller.
I simply add something like the following to Block 20 ("Additional Terms"):
"Buyer reserves the right to finance a portion of the purchase price, but is not requesting a financing contingency".
Obviously, if your financing falls through in this scenario, you are obligated to cough up the cash to close, or lose your deposit. But it makes for a MUCH stronger offer than a financing contingency.
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Account Closed
Investor · Orlando, FL · Member since 2016 · 1k+ posts · 780 votes
10y
The answer to the original question is the seller does not care where the money comes from. The only issue with financing is it a contingency on the contract or not.
You can put in the contract 'This contract is contingent on my partners approval' as a way to get out of the contract if needed.
In answer to Austin's question. The way to make multiple offers is to write up 3 contracts and offer them to them one at a time. The first one is all cash and you expect them to NOT take that offer because it is too low a price. Then you give them the 2nd offer where you are offering them a higher price than the all cash offer, but below full market price, then putting down some cash (about 10-20% of offer) and the seller will finance the balance at a monthly payment that is quite a bit below what you think you can rent it for (but at 0% interest). The 3rd way is to give them their asking price with very little down (no more than 10%), a little more than contract 2 in monthly payments as long as you need it at 0% interest.
An example is I am going after expired listings and negotiated a deal with the seller on their $295,000 property. They had it listed for 6 months without any contract. The property is in great shape so it did not need any work. The market price is $295,000. I first offer him $191,750 (65% of market $) all cash. He rejected it. I gave him contract #2: purchase price $250,000 with $25K down and the balance at $1,500 a month for 5 years and the balance of $135,000 paid at the end of the 5th year. And the 3rd contract is at full market price of $295,000, $30k down and monthly payments of $1,500 for 176 months (at 0% interest).
He countered at $265,000 purchase price, $65k down, $895 month payments for 5 years and the balance of $200,000 paid at end of 5 years. Yes the monthly payments does not lower the principal but I was going after seller financing, which is more important. I plan to sell it on a lease option with $75k down, monthly payments of $2,000 and purchase price of $295,000 for 12 months. The purchase price goes up 10% each year they do not exercise their option for a max of 5 years.
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