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I don't know about this "front of the line" business. I sold my house in an extremely frothy market in San Francisco in 2002; the agent showed the house on a Saturday and accepted offers the next Wednesday. There were 8 offers, all over asking price, and I accepted the one that was $102K over asking, not the one with the highest down payment. The buyers were pre-approved and had a very high verifiable income. Our only concern was whether the house would appraise for that amount, but it did.
As the seller, it made no difference to me how much of a down payment the buyer was going to make. The check I got at closing and the likelihood of the buyers getting their loan were all that mattered to me.
I don't know about this "front of the line" business. I sold my house in an extremely frothy market in San Francisco in 2002; the agent showed the house on a Saturday and accepted offers the next Wednesday. There were 8 offers, all over asking price, and I accepted the one that was $102K over asking, not the one with the highest down payment. The buyers were pre-approved and had a very high verifiable income. Our only concern was whether the house would appraise for that amount, but it did.
As the seller, it made no difference to me how much of a down payment the buyer was going to make. The check I got at closing and the likelihood of the buyers getting their loan were all that mattered to me.
Your situation is a little different, being you had an offer for over $100,000 above asking..
If you had 8 offers in front of you, all at the same price, and one with 50% down with the rest only 20%, you *might* have been more likely to put focus on that 50% down offer.
I, as a seller, would NOT be "drawn" to a larger downpayment. In fact I'd wonder why either potential buyer was even making any mention of it - and it would not be a good kind of wondering.
However, if you want to get my attention - a larger earnest money offer would do that.
Based on what the OP is posting, I don't think their agents is trying to do a bait and switch offer, they are trying to convey that the borrower has enough cash to put 50% down on $690. There is confusion about down payment % and LTV. I think the borrower intends to get a 80% LTV, but if the appraisal is low, they will still get an 80% loan but the down payment is a higher percentage of the 'Sale Price'. The lender will still see it as a 80% LTV loan. I think the contract is written in Lawyer Talk making it hard for people to understand.
He's been really good so I don't know if perhaps I'm just explaining it incorrectly. Here's what he said when I asked how I could make my offer more appealing than my competition:
**Large Down Payment: I would write in your down payment is 50% of the purchase price. You can absolutely close by doing 20% down, even if it says 50% down in the contract (it actually states this in the contract). Showing you are putting down 50% shows you are more qualified than the next person to buy the property. It also shows you are fine if the property appraises for less than the purchase amount – this would all be taken care of because you have a large down payment.
Loans are based on scenerios. If you are putting down 20%, you get a really good rate, If you put down 25% or more, you usually get a little better rate. That’s it. If you put down 50% VS 25%, the only difference is your loan amount would be less - your rate would be the same and the loan program is the same. So, let’s say you offer $800,000 and the property appraises for $750,000 and in your offer, you put that your down payment is 50%. 50% down off of $800,000 is a $400,000 down payment, and your loan would be for $400,000. But, the place only appraised for $750,000 – it doesn’t matter - You are still buying it for $800,000 and still putting down $400,000, and your loan amount would still be for $400,000. It is the same exact scenario for you, because your final loan amount of $400,000 is still over 53% down payment of the appraised amount (750K x 53%) – still meeting the guidelines of the bank’s loan.
I am still confused, OP ... WHERE in the 3rd paragraph above are you doing a 20% loan? If you're putting down $400,000, you are making a 50% down payment if it appraises for $800,000 or a 53% down payment if it appraises for $750,000 (as you wrote). Nowhere does it say where you are putting down 20%, even though in the 2nd paragraph you say your broker wrote that you can "absolutely close by doing 20% down." But the example in the 3rd paragraph doesn't show that -- in fact, it says, "you are still buying it for $800,000 and still putting down $400,000 and your loan amount would still be for $400,000" -- which isn't 20%.
It states in the contract that the down payment will be 50% but you are still "allowed" to put down 20%? That makes no sense either.
If all you want to convey is that you can AFFORD to put down 50% (even though you don't want to), why can't you just give the seller proof of funds?
...I'm being advised by my broker to offer 50% down payment of the purchase price.
Quote:
Originally Posted by Sojj
However, if you want to get my attention - a larger earnest money offer would do that.
In my area, the terms "down payment" and "earnest money deposit" are sometimes used interchangeably. In fact, many of my contracts call for a down payment which is paid either to the seller (rarely) or to a title company (preferably) as the escrow agent.
If your 50% down payment is to be paid to the seller or an escrow agent, that would be a foolish thing to do. It's rare, but problems do happen with contracts which could threaten your down payment. You don't want to have that much money tied up while waiting for the contract to be fulfilled, or for problems to be resolved.
If you would be making a separate earnest money deposit, yet putting in the contract that you would be financing 50% of the purchase price--while truly planning to finance 80%--that would simply be wrong. Nothing good could come from that. Why put it into a contract at all? To best strengthen your offer, get pre-approved...or have all cash available.
I'm not sure I like the "50% down, but actually going to close with 20%" aspect. On second thought, not only am I sure I don't like it, it positively stinks.
So much for ethics.
IN the 15 minutes since I posted this, I've found myself even more enraged at the agent representing the OP. Perhaps he is one of those Realtors who has a code of ethics I've heard so much about.
We can't do that here. What you put down is what you have to do at minimum or you risk losing your earnest money. You can always put down more, but not less. It goes under our financial misrepresentation category.
We can't do that here. What you put down is what you have to do at minimum or you risk losing your earnest money. You can always put down more, but not less. It goes under our financial misrepresentation category.
same here. Changing a lender is also potential grounds for forfeiture of the EMD (and additional penalties), if the new lender cannot complete the deal within the contingency windows set.
One thing I see a lot is where an agent will write an offer up for standard FHA, then you find out the buyer went FHA+ at closing. Not a big deal (being we made it to closing), but it's obvious they wrote it that way to make their offer just a bit stronger..
OP, do you have the cash, in your bank account and readily available to make a 50% down payment? if you don't then do not offer 50% down.
The difference is with the appraisal. If the bank says the house is worth $30,000 less than you offered, you can still finance if you have enough cash to put 50% down. If you don't have that money and the bank wants a much bigger down payment in order to finance, you've got a problem, because you have a contract that says you do have that money and you are willing to use it to purchase the house.
As prices go up, as they are doing, and banks are still feeling conservative, it is not all that unusual for a house to not appraise at full fair market value. Having a bunch of cash can be the only way to get a house in a fast moving market where a bank will not finance to the full fair market value..
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