What would you do - cash all in or finance

Question

I have a pending deal in NJ - it is a condo townhouse - the selling price is 107k. The appraisal came in for 117k. The rents are around 1200 or more if lucky but i am counting on 1200.

With all the calcs it should be generating roughly $2500 / $3000 annually, which is not bad at all.

I am having issues getting mortgage as the y keep asking for more and more documents but the seller is frustrated and will pull away from the deal if I dont get a loan in the next few days.

Question - does it make sense to buy for cash and refinance later? How soon will I be able to refinance given that I have the appraisal in my pocket? Does the appraisal matter at all, or when refinancing, they will not account for this appraisal at all?

TY

Ryan Cox · Answer

@David Khalfin Do you have a signed contract with the seller?  What are the terms of the contract?  Due diligence period? Close?  All of the terms of the agreement should be clearly spelled out.  If you are operating with the bounds of that agreement, I would stay on task with the lender.  The seller can be frustrated but that should not impact your ability to finance the property.

Melissa Kirchhoff · Answer

@David Khalfin - But exactly what you said -- It will be much more costly for them to break versus extending a bit longer. Then they have to go back on the market and unless they do get a cash offer (which idk about your market but in mine it's a gamble) then they are still looking at 30+ days plus any days on market before receiving that. Even with all cash offer, they would likely still be 3 weeks or so, we rarely see title work that is done before then. Someone needs to be advising them as such.

Also, that's pretty tight for any financing, especially with losing so many days to holidays those 2 months. Who advised of that tight timeline or was that the seller's push?

Idk, I still don't trust the seller lol, I would personally be very cautious and not tell them you have an option of cash....

David K. · Answer

@Melissa Kirchhoff, That is not a choice for us to extend the contract. The seller needs the money to buy a new property. We started the process in Nov and they assumed that we will be closed in Dec. They let the tenants go by xmas and so they are now losing money..

Of course, if they break with us, they will have to start all over again. But, it is possible that they won't mind as the prices in the community seem to continue rising. Similar homes in the same development are now asking 235k.

@Raul R., thanks for the clarification. Sure I understand that HOA can increase at any time. Historically though they have increased only very slowly. I think as rents raise as well, we have some wiggle room but yeah, I hate not be in control.

Melissa Kirchhoff · Answer

@David Khalfin - Also, if you do go with cash/refi (which I don't recommend right now). Make sure before you pull out, that you have already talked to lenders about the refi and what they can do and how long. Have one lined up and don't find yourself in a bad situation...

Melissa Kirchhoff · Answer

@David Khalfin - GET THE SELLER TO AGREE TO FINANCING EXTENSION **IN WRITING**. Aka update the contract with new dates and have them initially or do attorney to attorney. Keep yourself legally in contract and keep yourself safe. Fully and clearly explain why it's taking longer than expected and have your lender even explain to them or write up a quick note or what is needed to get commitment. Give them everything.

My question is: why is the seller so nervous? Might be a difference in market, but that makes me feel leery?

As to answer your other question - usually they say you can refinance in a year, and no, current appraisal should not matter (because it will be a year old and the comps used invalid at that point.) But I've had lenders do it as soon as 1 month after. So it is an option, but honestly, I wouldn't do that. Explain it and get the extension from the seller.

David K. · Answer

Thank you @Raul R.- it did not even cross my mind to check with the HOA. Are you saying that if i am allowed to refinance and the appraisal is higher than the purchase price then they will raise HOA fees? The property was last sold (according to trulia records) in 2003 for $130k, which is still higher than today's evaluation.

Thanks @Steven Gesis- cash def seems like a viable option for this particular deal, I am just afraid that it will take a long time until it is refinanced.

Does anyone have any idea as far as timing is concerned - will they allow me to refinance right away or will I have to wait 6 mo/year

Steven Gesis · Answer

Have to stay within the boundaries of your contract, if seller elects to terminate because you have exhausted the allotted time and does not want to extend, you do risk termination, simply paying cash and then refi will be simple, you can also HELOC it and not pay any fees later : - you have options it sounds like

David K. · Answer

Thanks @Ryan Cox,

yeah, we have a contract but it is dated and the seller can easily get out of it by now.

They basically gave us a deadline to get it done, which is this coming Friday.

What would you do - cash all in or finance

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