Making an offer before financing is set?
5 Replies
Josh Dillingham
Rental Property Investor from Brattleboro, VT
posted over 3 years ago
just signed initial disclosures and submitted all documentation for a cash-out refi on a single family property I bought one year ago. I'm expecting the property to appraise for 70k and take out 75% LTV for a total of 52k in cash out. My plan is to use this money as a down payment for a small multifamily. I'm going to look at a 3 unit property this afternoon asking price is 90k. My numbers say it would be a good deal at the asking price + 20k in renovations/closing/vacancies.
If I like what I see today I'd like to make an offer. Am I being too aggressive considering I don't have any guarantee that the cash out refinance will go smoothly? Even if the single family only appraises for 50k it would give me enough cash for 25% down on the 3 unit, but there is always a chance the cash out refinance could fall through all together. I only have 10k in personal savings I could use for this deal, not enough for the down payment. I don't want to let a good opportunity slip through my hands but I also don't want to act irresponsibly
Thomas S.
replied over 3 years ago
Offer conditional on financing and take your chances. Opportunity is worth a try. You lose nothing if the offer is rejected however if accepted you stall for time.
It's a win/no loss situation.
Jacob Rhein
Lawyer/Investor from Atlanta, Georgia
replied over 3 years ago
Second @Thomas S. You could also sweeten the contingent offer by including some nonrefundable earnest money.
Josh Dillingham
Rental Property Investor from Brattleboro, VT
replied over 3 years ago
@Thomas S. and @Jacob Rhein Thanks for the advice. I've made offers contingent upon financing in the past, but I already had the down payment lined up so it felt a little different, but I guess it's all the same. I do plan on offering some earnest money so hopefully that will help.
Jacob Rhein
Lawyer/Investor from Atlanta, Georgia
replied over 3 years ago
Thanks. The key is just to make sure the financing contingency covers you so you don't get accused of fraud.
If you only have about 10% in cash right now, your contingency clause needs to be about 90% or specifically contingent on the refinance or sale of another property plus contingent on a mortgage for the remainder.
Harjeet Bhatti
Lender from Chicago IL- CDLP
replied over 3 years ago
For some reason if you think your cash out finance won't work and you have very good opportunity to investment get a HML as back up. Generally after submitting the file you should have an answer by 48-72 hours by Under Writer.