Posted by Frank Chin on April 10, 2006 at 09:29:51:
There is “owner will not finance”, vs. “cash only”, and then there’s a THIRD WAY, “conventional financing” WITH NO CONTINGENCIES".
I’ve gotten a good below market price from a seller, but he wanted a quick sale, so I offered to do 25% down, 75% with conventional financing. He turned to his attorney and said “what if this guy gets turned down”.
So I said “what if I do 25% down, and if that’s a problem, I do 50% down with a contingency, at that level, since we we have good credit, and one can always get financing at 50% down”. His attorney and agent nodded, so the deal was done that way.
That’s because few buyers will do 50% down, and CASH ONLY buyers will want an even better price.
Did a sale that way as well. P&S contract has no contingency. While the contract called for 25% down, was advised the buyer will do 50% down, or even more if it didn’t fly.
Turns out the bank came back and asked him to do 30% down, and we completed the sale. Bank wanted to see better cash flow, and he wanted the good rates conventional financing will allow.
Had there been a contingency at 25%, I would’ve had to start all over again.
Through the years, I’ve seen sellers look at no contingency in the same light as “cash”, though you must complete the purchase if the bank turns you down intitially, and you must have a backup plan. Otherwise be prepared to pay a penalty.