Just a few days ago we managed to get a house under contract! The house is less than 3 blocks from our very first home, Foundation House. It was listed as Coming Soon on the MLS, but our realtor reached out to get a feel for things.
We had been targeting the same area as Foundation House in order to try to create a cluster of impact homes, and this property is only a short walk away. The proximity will be helpful in allowing us to build inter-family community over time.
After some back and forth discussion prior to listing, we were able to get an offer in the second it hit the market, and the seller accepted the offer shortly after.
The house is a 3 bedroom, 2 bathroom row home with a finished basement. Much of the home had just been upgraded, including the roof, first floor, and a round of paint. It will require a new boiler for heating as well as a hot water heater, but most of the homes in this area require those upgrades due to their similar age.
Our offer included an inspection contingency (meaning we can back out of the deal if an inspection turns up issues that we are concerned about). After a formal inspection and discussion with our fantastic contractor team, we were able to negotiate another $7,000 off the agreed upon price, almost covering the new boiler for free!
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 35% of the property and rehab cossts and use a short term loan (which last only a few months) to obtain the remainder of the “cash” needed to purchase the property.
These type of loans are provided by a special group of Compound Impact supporters called our Bridge Team. These generous individuals provide loans for 4-8 months at 0% interest to Compound Impact to allow us to take advantage of these specialized techniques.
What happens in a few months? Don’t worry, we’ll get to that soon!
In a few weeks, we’ll move on to settlement, at which point the official sale of the property will occur. In the meantime, we’ll be working closely with our contractors to be ready to launch into the rehab as soon as the property is ours.