Switching From Private Lender to Conventional Before Closing?

[Tony R Fox]

Hey Team!

Looking for some help on some financing with my contract before closing.

So I was going to buy a duplex with private money. On the contract that the seller accepted, I specified private money and would be able to close quickly. However, people have been telling me to go conventional because I have the capital. My concern is that with the BRRRR, if I go conventional, I do not have enough capital to do the rehab I want and have enough $ as a safety net.

With my contract, if I wanted to switch to conventional, is that possible or do that risk the seller backing out? From my understanding, I would have to cancel my original contract and resubmit a new contract with different terms (which the seller can reject), etc. Opens me up for risk of losing the property and I was not the only bid on this.

Any and all help with this is appreciated!

[Joe Martella]

If you are changing the terms of what the seller agreed to then you are running the risk.  You could even be risking your deposit.  Was there a great deal of competition for this property?  If there was, I wouldn't want to risk losing the deal. 

My personal opinion is to run your numbers.  If you know you can do the deal with the private money you already have lined up, then keep things moving forwards.

If you are questionable if you aren't going to be able to do the deal with conventional financing then why change?

What would be your benefit to go from private to conventional?  If it is interest rate, you can always refinance later, but the worst thing you can do is run out of money in the middle of a rehab and now you are in a jam.

Go with what your numbers are telling you.