San Francisco, CA · Member since 2015 · 19 posts · 5 votes
I have a huge interest in purchasing a prospective multifamily property. The original game plan is to use an FHA loan to finance, live in one unit and rent the others. I have a small amount of liquid assets, hence my strategy. The catch is that the seller has a no finance contingency. How should one proceed? Are there any options for me? Any assistance would be greatly appreciated. Final fun fact, I am a brand new REI, this would be my first purchase...
It may be helpful to know the seller's exact reasoning for demanding this. Many times, if you have financing set up before the offer is accepted, you can negotiate with the seller with that in mind. If you already have all documents to the lender and they are ready to proceed as soon as they get the purchase agreement, the seller may be more willing to accept it because it will be a quick escrow.
Flipper/Rehabber · Tacoma, WA · Member since 2016 · 100 posts · 34 votes
10y
You could also see if he's willing to take a down payment, then seller financing for the rest at a higher-than-conventional rate.
Refinance with a conventional lender as soon as you have the property in your name and pay off the seller.
This way he has a quick closing and you have time to get your ducks in a row.
Flipper/Rehabber · Tacoma, WA · Member since 2016 · 100 posts · 34 votes
10y
Also - make sure that a conventional lender would loan on this property!!
For FHA, you won't get approved for a list of reasons (flaking paint from before 1978, etc...). I'm not an expert, so I usually have someone come out and help with that part during walk through.
Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
10y
@Andrea Mas, it's generally not a good idea to risk something you aren't willing to lose. If they insist on no financing contingency, negotiate down the earnest money deposit to be a sum of money you are willing/able to give up. If you and the seller can't have a meeting of minds in the middle, great you move onto the next one.
FHA on MFR, especially with our older housing stock in the Bay Area, it's a giant unknown if you can even get the property until the appraisal is back.
More generally your best bet for using FHA to buy a MFR in the Bay Area will be to go find something off market where you aren't in competition with multiple other buyers putting 30% down, etc. Go read up on strategies used by wholesalers to find deals (mailers, knocking, etc), and do that stuff.
It's probably been over a year since I did an FHA mortgage for a 2-4 unit that was...
In one of our core markets,
Arms length,
Retail/MLS, and
FHA.
Start crossing one or two things off that list (skip Oakland and go to Stockton, befriend the seller, put 20%+ down, etc), and yeah those deals happen all the time. Stack 'em up, and it becomes implausible/hard for buyers to even get their offer looked at.