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ForumsArrowBuying & Selling Real Estate DiscussionArrowMaking an offer before financing is set?
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Making an offer before financing is set?

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  • Posts 204
  • Votes 170

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

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  • Posts 14K
  • Votes 13K

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.

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  • Posts 33
  • Votes 34

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. 

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  • Posts 204
  • Votes 170

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.

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  • Posts 33
  • Votes 34

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.  

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  • Posts 2.2K
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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.

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