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Looking for a recommendation for a local mortgage expert - ideally direct financing not broker, but either way - that is very familiar with the delayed financing / "cash out refi" approach to mortgages. For those not familiar, this is where you would purchase a house (primary residence not investment for me) with an all-cash offer, but then pretty quickly turn around and take out what is similar to a "regular" 30-year mortgage. There seem to be some quirks in the process that I'm trying to figure out, and would welcome any suggestions for a local place that knows them cold.
can't say I've heard of this being used in these parts, but you're well within your contractual rights to make a cash offer yet obtain financing. And if your financial picture is simple and clear, they'll definitely get you closed within 30 days from contract.
My company does delayed financing regularly here in Raleigh. In fact our office has one that is in processing now. They are a little different, but overall the lender still sees a borrower and collateral.
I have 7 loans, 5 of which were bought with delayed financing. I bought with all cash, closed, renovated, and then did a cash out refi right at the 6 month mark. Mine were for investment purposes (unlike what I believe you want to do) but if you read all below it will address your issue too.
The 6 month mark is the key, and here is why: if you wait 6 months, the Fannie/Freddie guidelines allow you to use an appraisal to determine the current value of the house and thus the loan will be based on on that amount (you can cash out up to 75% LTV on single family or 70% LTV on 2-4 unit properties [duplexes, triplexes, and quads]). I always waited 6 months because I would buy complete dumps for $50,000 to $70,000, put $40,000 or more into the renovation, and then get it appraised for $150,000+. The goal is to buy properties where you get every dollar you spent in the purchase plus rehab back due to the new higher appraisal. Then you take that money and go do it again and again.
You also have the option to buy a house all cash and close, and literally the next day you can turn around and get a cash out loan. I believe this is what you are looking to do.. Here the big difference is your LTV will only be based in the purchase price plus any repairs you did. That goes for the first day after you close until 1 day before the 6-month mark from when you closed. But I believe from your post that you are fine with that.
I have several good lenders I can suggest that can help you. I hope this info clarifies how it all works.
can't say I've heard of this being used in these parts, but you're well within your contractual rights to make a cash offer yet obtain financing. And if your financial picture is simple and clear, they'll definitely get you closed within 30 days from contract.
This is incorrect, according to the real estate commission. The type of financing is a part of the contract and if the buyer changes that financing mid-contract they need to ask for an amendment. Like any other amendment, the seller does not have to grant it if they don't want to. Sellers make a decision, especially in multiple offer situations based on the ease of the transaction, in addition to the bottom line. If they assume that you are paying cash and then it turns out you are using a lender to purchase and the closing gets delayed due to financing...I think the buyer could be putting themselves in a legal bind.
This is incorrect, according to the real estate commission. The type of financing is a part of the contract and if the buyer changes that financing mid-contract they need to ask for an amendment. Like any other amendment, the seller does not have to grant it if they don't want to. Sellers make a decision, especially in multiple offer situations based on the ease of the transaction, in addition to the bottom line. If they assume that you are paying cash and then it turns out you are using a lender to purchase and the closing gets delayed due to financing...I think the buyer could be putting themselves in a legal bind.
Can you provide a citation from the NC REC?
The Legal Department at NCAR has repeatedly advised that the Buyer Representation in the NCAR Standard Form 2-t, Offer to Purchase and Contract, is not binding on the buyer, as long as the buyer is working in good faith when writing the Offer. If there is intentional misrepresentation, that is never supportable, and a Realtor who is in on the game can face an ethics complaint.
Check out the Forms Guy statement on it at NCAR, from August 2, 2016.
Financing can be revised. No amendment needed. As stated in the Guidelines for Completing the Offer to Purchase and Contract: "Buyer Representations are statements of current facts that Seller may reasonably rely upon in deciding whether to enter into the Contract."
And the closing date in the Contract is only an estimate, long held as such in NC.
The buyer risks EMD as liquidated damages in case of breach, and any Due Diligence costs if delaying closing beyond the terms in the Contract, but that is about it.
Last edited by MikeJaquish; 10-13-2016 at 09:43 PM..
Buyer makes a representation as to whether they do or do not NEED to obtain financing to purchase the property.
Most of the details/blanks that follow in that paragraph are the same they've been for 15+ years ... meaning somewhere someone when we revised the forms just couldn't part with them as a nod to tradition.
I have 7 loans, 5 of which were bought with delayed financing. I bought with all cash, closed, renovated, and then did a cash out refi right at the 6 month mark. Mine were for investment purposes (unlike what I believe you want to do) but if you read all below it will address your issue too.
The 6 month mark is the key, and here is why: if you wait 6 months, the Fannie/Freddie guidelines allow you to use an appraisal to determine the current value of the house and thus the loan will be based on on that amount (you can cash out up to 75% LTV on single family or 70% LTV on 2-4 unit properties [duplexes, triplexes, and quads]). I always waited 6 months because I would buy complete dumps for $50,000 to $70,000, put $40,000 or more into the renovation, and then get it appraised for $150,000+. The goal is to buy properties where you get every dollar you spent in the purchase plus rehab back due to the new higher appraisal. Then you take that money and go do it again and again.
You also have the option to buy a house all cash and close, and literally the next day you can turn around and get a cash out loan. I believe this is what you are looking to do.. Here the big difference is your LTV will only be based in the purchase price plus any repairs you did. That goes for the first day after you close until 1 day before the 6-month mark from when you closed. But I believe from your post that you are fine with that.
I have several good lenders I can suggest that can help you. I hope this info clarifies how it all works.
Would appreciate the lender recommendations. I am curious, have you seen it make a difference as to % of LTV whether it's a Fannie Mae or Freddie Mac backed mortgage? Fannie Mae seems to be at the 70/75% max, but Freddie Mac at 80% (which would of course be preferable). I'm also trying to find a source that provides the add'l piece about `purchase price *plus* any repairs'. I've seen that suggested in a couple of blog/news articles, but the language I read in the Fannie/Freddie guides just speaks to purchase price, and does not include the add'l point about repairs upping the max loan you can receive. That would be a great option to have, as the property I have in mind needs prob 10-20k add'l investment.
The Legal Department at NCAR has repeatedly advised that the Buyer Representation in the NCAR Standard Form 2-t, Offer to Purchase and Contract, is not binding on the buyer, as long as the buyer is working in good faith when writing the Offer. If there is intentional misrepresentation, that is never supportable, and a Realtor who is in on the game can face an ethics complaint.
Check out the Forms Guy statement on it at NCAR, from August 2, 2016.
Financing can be revised. No amendment needed. As stated in the Guidelines for Completing the Offer to Purchase and Contract: "Buyer Representations are statements of current facts that Seller may reasonably rely upon in deciding whether to enter into the Contract."
And the closing date in the Contract is only an estimate, long held as such in NC.
The buyer risks EMD as liquidated damages in case of breach, and any Due Diligence costs if delaying closing beyond the terms in the Contract, but that is about it.
This was something that was coming up frequently in my brokerage so the BIC called the NCREC to clarify and then it was discussed as a group. There was definitely a lot of disagreement among the powers that be, and I think it could be something that could go either way in a courtroom. And it may be the case that the NCAR has made a statement that disagrees with the NCREC but I think there is enough ambiguity that it's important to at least be aware of that ambiguity when advising about that clause.
Buyer makes a representation as to whether they do or do not NEED to obtain financing to purchase the property.
Most of the details/blanks that follow in that paragraph are the same they've been for 15+ years ... meaning somewhere someone when we revised the forms just couldn't part with them as a nod to tradition.
That was my argument as well...that is what it says. I'm wondering if they will change the language in the contract at some point.
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