Hello all.. I have a property that I am bout to go under contract on, to be a primary residence. This will be a private deal with our attorneys- no real estate broker involved. The contract will be signed soon but the deal will not be able to close for 3-4 months. Both owners died, one of which didn’t have a will, so they have to get their nephew appointed as executor before we can close.

Today, I spoke to the seller’s attorney to get the purchase price and some other info straight. He asked how I will be financing the deal, told him conventional. He asked how much of down payment. I told him 5% down conventional loan. He said that this makes him uncomfortable because the bank may ask for more money as a down payment because of the condition of the house and it being sold AS-IS. The house is in livable condition with some holes in sheetrock but nothing too major. I have never heard of the lender coming back and asking for more money as a down payment DUE TO condition of the house. I have heard of them not lending to houses in un-livable conditions but never heard of a request for higher equity stake. Is this a thing???

He said that he would want a stipulation put in saying that if the bank requests more than 5% down, I will supply it. This way they haven’t been tied up in a contract and need to find a new buyer if this occurred. I understand trying to protect themselves from losing a sale and having longer holding costs, but just didn’t think this would be something the bank would ask. This stipulation would have a stop number. So say “buyer will put in higher down payment if bank requests it, up until 20%” or something like that.

I really don't get how this would happen especially because our agreed upon price is already $20k lower than what the as is appraised value came back at. (They had it appraised at $430k) Our sale price is $410. So my LTV from the get-go after the bank sends their appraisal will be more like 10-11%.

Now that I talk about it, that makes me think... is he trying to protect them if appraisal comes in lower due to any possible market corrections? If 4 months from now, the new appraisal comes in at $390, my bank will obviously not loan me on the $410 purchase price. Is his attorney trying to ensure I have to come up with the difference if this happens?! I will be sure that my attorney goes through this thoroughly so that the language states only if the bank requests more because of high LTV financing, NOT because of the possible changes in appraisal because they needed to drag out the selling process.

@Harrison Busbee @Matt Wood @Dan Hertler

0 Votes