Making an offer before financing is set?

5 Replies

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

Josh Dillingham

    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.

    Second @Thomas S. You could also sweeten the contingent offer by including some nonrefundable earnest money. 

    @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.

    Josh Dillingham

      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.  

      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.

      Harjeet Bhatti, Lender in IL (#230554)

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