“Cash” Offer Vs Hard Money - Same?

Question

How are you writing your offers when they are funded with hard money?

My realtor and I recently put a cash offer on a house, but in reality I plan to fund it with hard money. There is no “hard money” purchase option in the realtor offer forms, so cash kinda makes sense, but there is a spot for “other,” which maybe is a better spot?

The problem with a cash offer using hard money is it still has to go through their underwriting and there is a 3 week turn-around, so the deal would fall through if something didn’t work out. Or, I’d have to get an extension of the closing date, which kinda defeats the purpose/competitive edge of a cash offer. Also, if they are expecting I have the cash to back up the offer, but I turn around and say, “Hey, my funding isn’t ready yet,” or it falls through completely, they’d probably feel a little bamboozled and unhappy.

If the underwriting goes smooth and I can have the cash on hand at closing, then maybe the owner wouldn’t care how the cash offer is funded.

What do you do for this scenario?

Andrew Syrios · Answer

The idea behind a cash offer is that well, you have the cash. They will almost certainly demand a proof of funds letter too. If you don't have that, they'll almost always reject the offer. The other thing is that there will be no financing contingency of course, so you can't get your emd back if the loan falls through because, well, there's not supposed to be a loan.

I would just get a preapproval letter and offer that. Back in 2021 when the market was on fire, sellers would be wary of financed offers because there were so many alternatives. Those alternatives don't exist today (generally) so you should be fine just saying its financed.

Jonathan Greene · Answer

Hard money is not cash and should NEVER be written on a contract as cash. There is always an other box for funding and then you put Hard Money. The listing agent should know anyway since your letter should be coming from the hard money lender.

The only thing that is cash is cash. Not hard money, not private money. Maybe a HELOC because it's in your account. But anything with an appraisal of any kind is not cash and should not be called cash.

Matthew Hull · Answer

Ok - thanks, guys! Super appreciate it! That helps reorient me - future deals will be written appropriately. :)