Down Payment

[Yameen Salahuddin]

This might be a dumb question - but here goes: In my search for my first investment property, every realtor I speak to has the same question - how much am I going to put down? My question is this - assuming you close escrow timely, what is the big deal about the down payment? If the seller is going to get 100% of the money in a couple weeks after I tender my downpayment anyway, what is the effect of a bigger or smaller downpayment?
Thanks for any thoughts!

[Jeff Takle]

Yameen,

To address another one of your questions: yes, you may lose the deal if you have 100% financing to someone paying more cash down. That's a risk. But, if you have no cash to put down, it really isn't an issue--you don't have options. Things you can do to help your negotiating position:

-Learn something about the seller and write a cover letter to your offer that somehow connects with them. "Having recently divorced, I am rebuilding..." or "When I was in the Marines (like you), ...". Sometimes that makes a personal connection that's emotional, which always trumps rational.

-Get your lender to write the pre-qual letter and title it a "Fully Approved for Financing" letter. The guts of the letter are the same, basically you are fully approved as long as everything you told them checks out. It's completely non-binding to the lender but the seller may see two offers, one "pre-qualified" and one "Already fully approved for the loan" pending verification. The second offer looks stronger.

-Find out something about the seller and structure your offer to meet their needs. I.e. if they want to sell now but stay in the house for another 3 months, include a blank post-occupancy settlement agreement in your offer and let them know you're open to that idea.

-Consider striking some clauses in the agreement. I hate suggesting this because it greatly increases your risks, but you could forego a home inspection or--much better--do a home inspection "For Informational Purposes Only" which means that you won't nickel and dime them for every bent pipe or dirty outlet. Nothing really prevents you from going back and asking for minor repairs after the home inspection FIPO, but it makes the seller feel like you won't and you still get a professional to tell you if there are any major issues with the house. The seller is still obligated to disclose or disclaim any safety or major structural problems, both of which may be found during the inspection.

-Offer to pay for a professional moving company for the seller. Everyone hates moving. Make it easy by shelling out $2,000-$3,000 for a mover. Make sure you're not moving a 6 bedroom, 4 floor house before you suggest this, though!!!