<< July 30, 2021 >>
Just a few days ago we managed to get a house under contract! The house is a single family home with 3 bedrooms and 1 bathroom. We were fortunate that the sellers were in a bit of a time crunch, so they were willing to reduce their price from list price in order to sell the property quickly.
Paying in cash
One of our key purchase strategies is paying for houses in cash. When anyone makes an offer on a house, and that offer is accepted, the house is considered “under contract”. The sale of the property has not occured, but the contract is an agreement between the seller and buyer that the sale will occur on a future date (called the settlement date).
While the house is under contract, there are a number of ways that the deal can fall through. For example, there is often an official inspection of the home by a licensed inspector. If there are any serious concerns, the buyer can leave the agreement and have their initial deposit returned. This is called an “inspection contingency”.
Another common contingency is a financing contingency in which the buyer can back out of the deal if they are not able to secure a mortgage for the property. Many deals fall through this way. However, if the buyer is going to pay in “cash”, meaning they are not going to be getting a mortgage from a lender, then the seller does not have to worry about the financing falling through at the last minute.
For this reason, buyers (like Compound Impact) who are able to pay “cash” for a property have a significant advantage over another buyer who will need a mortgage to purchase the property.
We do not fundraise the entire purchase price before purchasing a property. Instead, we fundraise about 25% of the property value and use short term loans (which last only a few months) to obtain the remainder of the “cash” needed to purchase the property.
What happens in a few months? Don’t worry, we’ll get to that soon!
Now that the house is under contract, we will have a licensed inspector walk through the property to make a formal report on it’s overall condition. As long as there aren’t any major issues, we’ll move on to settlement in about a month, at which point the official sale of the property will occur.