[Arcinio Arauz]

Arcinio Arauz

I have a four plex under contract and two possible buyers. Buyer A has 25K down will finance the rest. Buyer B has 40K down also with institutional financing. I spoke to the owner of the four plex and told her that Buyer B has a bigger down. She asked me what difference does a down payment make if the funds go to escrow anyway and with either buyer, she’ll get the same amount in end anyways. I didn’t have an answer for her. Please help. Selling four plex for 165K, under contract for 160K (if that helps).

[Kyle Corbin]

Kyle Corbin

Where is Buyer A getting financing?

[Kyle Corbin]

Kyle Corbin

I’m sorry, I misread.

If I understand correctly, both buyers are buying for 165k, in that case there is no difference to your seller. Either way she gets 160k. The larger down payment in this case only really benefits the buyer’s cash flow as his mortgage payments will probably be lower.

[Arcinio Arauz]

Arcinio Arauz

Thank you, that’s what I though but what about the whole ” who ever brings the biggest down payment” gets the property? I know with HBS Jackie has spoke about the highest down payment. But again…help me understand how that matters if the funds got to escrow anyway. Thanks again.

[Jackie Lange]

Jackie Lange

definitely go with the person with the bigger down. the more skin in the game, the bigger the chances it will close.

You could wait a month to find out the $25k down buyer can’t get financing. By then, you’ll probably lost Buyer B

Suggest you make all or part of the down payment NON-REFUNDABLE. So they have more to lose if they back out

[Kyle Corbin]

Kyle Corbin

Jackie,

You’re right, but I think his underlying question is what the difference between a highest down payment sale and a highest bidder sale.

Obviously in a highest down payment sale, the highest down payment is preferable. Why? When do you use highest down payment and when do you use highest bidder?

[Arcinio Arauz]

Arcinio Arauz

Correct Limbstan….I was also under the impression that the down payment goes to Escrow.

[Kyle Corbin]

Kyle Corbin

I believe it has to do with if you’re selling with seller financing or not. In a highest down payment sale, you offer a fixed price for the property with seller financing, then you award the guy with the largest down payment. This way there is a larger “chunk” for you in the deal.

[Arcinio Arauz]

Arcinio Arauz

That’s it…you hit right on the nail and that’s makes more sense. With instututional finacing the down payment doesn’t matter (only matters to the lender). With owner financing, the one with more cheese get’s the property hence a bigger pocket of cash goes to the seller.

[Jackie Lange]

Jackie Lange

Arcinio

YOu only use the highest down payment sale when you are selling with seller financing.

When you’re buyer is getting institutional financing, the down payment MATTERS a lot!!!!

You want to pick the buyer with the most down payment and the best credit. BOTH. Anyone else could NOT close and you’d have to start all over again.