Accountant · greenwell springs, LA · Member since 2009 · 177 posts · 43 votes
I entered a cash offer for a REO that was accepted. However, I think i can get a loan pretty easy to fund the deal. Am I obligated to use my own cash for a cash offer or can i get a loan?
Thanks for the info, can I ask what the stipulation says? Is it simply "buyer may switch from cash to financing"?
That's the gist of it...
The exact wording we use is:
"This is an all-cash offer, and proof of funds is attached. However, buyer may choose to close this transaction with a loan from his preferred lender. Note: There is NO FINANCING CONTINGENCY, as cash will be paid if Buyer chooses not to secure a loan."
Hi, so long as your loan is in position to fund at the table, it is cash. It does not matter on the seller's side, but you better be prepared to fund it yourself if the loan fails to close when needed.Bill
I do this all the time (though I have a stipulation in my offers that says I may switch from cash to financing).
Essentially, you'll want to let the listing agent and the closing attorney know ASAP that you're switching to financing, and also let the listing agent know that if the financing doesn't come through in time for the close that you'll close with cash (this will make her more comfortable).
Ultimately, the closing attorney is going to need a contract amendment that says you're switching to financing, and the seller will have to sign it. I've never had a seller have an issue with this.
I agree with Bill that it's cash at the closing table, even if you finance it, but the closing attorneys don't generally see it that way, and WILL ask for an amendment to the contract.
I've done this over a dozen times without an issue. The only issue I ever had was last week when my lender screwed up and missed the closing deadline. I showed up with cash to the closing, and everyone was happy... (except my lender, who I reamed out :).
Thanks for the info, can I ask what the stipulation says? Is it simply "buyer may switch from cash to financing"?
That's the gist of it...
The exact wording we use is:
"This is an all-cash offer, and proof of funds is attached. However, buyer may choose to close this transaction with a loan from his preferred lender. Note: There is NO FINANCING CONTINGENCY, as cash will be paid if Buyer chooses not to secure a loan."
Thanks for the info, can I ask what the stipulation says? Is it simply "buyer may switch from cash to financing"?
That's the gist of it...
The exact wording we use is:
"This is an all-cash offer, and proof of funds is attached. However, buyer may choose to close this transaction with a loan from his preferred lender. Note: There is NO FINANCING CONTINGENCY, as cash will be paid if Buyer chooses not to secure a loan."
Good explanation Scott. Usually your lender will take care of that for you, if they are on top of it. The closing douments and contract as well as all other related documents must match for an audit trial. If your contract says cash, and you have loan fees on the HUD-1, that will send off red rockets, not just red flags.
"This is a cash offer, however the buyer reserves to option to obtain financing prior to closing" could be used in the financing section if there is room or just add it in special addendums. Bill
Perfect response and wording by J Scott. Your cash offer really mens that you cannot use financing, or lack thereof, as a contingency to get out of the contract. The seller just wants to see it close, but to cover your bases an amendment before the 11th hour is a good suggestion.