Rental Property Investor · Potomac, MD · Member since 2016 · 115 posts · 64 votes
To me a "cash offer" doesn't necessarily mean all cash, it simply means that I'm waiving the typical financing contingency clause and also not making the seller pay any portion of points towards a mortgage. It's a move I would consider if my price is low as a way to strengthen my offer and only if I'm very confident in getting financing.
Is this consistent with others views? If not, please enlighten me.
Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes
9y
I guess this is the fall out of the elections. Words dont mean anything anymore! Cash means Cash. AS opposed to financed. I bought a house with no finance contingency but with a mortgage. We didnt call it a cash offer but we did say we waive finance contingency. That too has no meaning unless there is a hefty earnest money that you can lose, which in that case there was.
Vendor · New York, NY · Member since 2017 · 217 posts · 88 votes
9y
I don't think "cash offer" can mean anything else except all cash - at least not in NY. A financing contingency clause is more to protect the buyer from backing out of the purchase agreement if they can't secure leverage, or to set an allotted time, so that sellers don't need to wait for a buyer to get approval for finance indefinitely. Saying "cash offer" will only get the sellers hopes up that the transaction closing will be super duper quick and easy. Best of luck!
Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes
9y
I guess this is the fall out of the elections. Words dont mean anything anymore! Cash means Cash. AS opposed to financed. I bought a house with no finance contingency but with a mortgage. We didnt call it a cash offer but we did say we waive finance contingency. That too has no meaning unless there is a hefty earnest money that you can lose, which in that case there was.
Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes
9y
Todd Magin If you make an all-cash offer you'd better be able to back it up with a screen grab of your bank account balance! Well maybe not all of the time but when I have made an all-cash offer in the past I could have sent a wire transfer the next day. In reality that doesn't happen because of inspection periods, lease reviews, etc. but I wouldn't purport to have the cash if I didn't.
Investor · Alabaster, AL · Member since 2016 · 280 posts · 88 votes
9y
Seriously?...A cash offer means just that and the next step is accompanying it with a current POF letter... and not one from an online source... that is called lying which our moms taught us not to do?
Rental Property Investor · Potomac, MD · Member since 2016 · 115 posts · 64 votes
9y
OK I stand corrected. Cash means cash!!
When you see "only cash offers", what does that say about the seller? Are they motivated? Want a quick close? The seller is eliminating most buyers, so they're basically begging for a discounted price?
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
9y
Usually it means the property is not in financable condition, or the seller has been burnt by people not able to get their financing. But a financed offer with no financing contingency, and a hefty EM, short inspection, will make them take notice and be more confident in your offer.
Vendor · New York, NY · Member since 2017 · 217 posts · 88 votes
9y
I work with many all cash investors in NYC, and the reason they do this is 1) the market requires them to since its so competitive, and 2) they need to park all their cash.
If you see "only cash offers", that probably means they want a quick close, but are probably not ecstatic about selling until an offer comes along that they like. OR they are just very ignorant of the market...
I think judging their motivation is still difficult since as you suggested, it eliminates a good amount of buyers, so why do it? I also don't think it discounts the price at all. I feel these people are probably just not eager to sell but will sell at the right # and cash.
Lots of people make all cash offers when they're backed by hard money
That is true but it is incorrect. If the buyer is not using THEIR funds they are financing the deal. Do that on a HUD deal and you may lose what you thought was your winning bid. They will insist, correctly, that your offer reflect the financing that you are using. If that is done on one of my sales I might reject the offer unless I know the lender and, maybe, the borrower. Hard money loans frequently fail to close.
Investor/Landlord · Farmington Hills, MI · Member since 2011 · 1k+ posts · 1k+ votes
9y
@Steve S., I rarely use lenders. I am a lender. I make cash offers. I have seen many sales fall apart when hard money loans have failed to materialize.
Lender · Los Angeles, CA · Member since 2015 · 800 posts · 229 votes
9y
@Jeff Rabinowitz mine don't fall out. If deals fall apart because of hard money then it's because of the guy running the show. We are all not created equal.
Investor · Princeton, TX · Member since 2014 · 1k+ posts · 1k+ votes
9y
What I have seen is simple. If you say "all cash" that means you have the cash to close without any delays. Most owners do not care if you use financing at the close, just do not make it cost them a penny or minute of time. That includes no visits from anyone as part of a loan process.
In fact, they might never even know you had a mortgage.
If you are planning on backing out of the deal if you cannot get financing after you have claimed it was an all cash deal I would suggest talking to a lawyer first.
Rental Property Investor · Washington Township, NJ · Member since 2015 · 1k+ posts · 976 votes
9y
Just to echo what others have said. I purchased a Homepath property with a private lender. After originally excepting the offer they asked for proof of funds. So I sent over the account statement for the private lender to show the funds were in his account. Fannie Mae came back and said I had 24 hours to put the funds in my LLC's account or they would keep the EM and cancel my bid since the cash offer was made and the funds weren't actually in my possession.
Fortunately the private lender was flexible and we simply had the note drafted and signed effective that day, he wired the funds to me, and then I was able to produce a statement for Fannie Mae from my LLC's account. When it came to closing the loan, we simply filed the note and mortgage backdated to when the funds were wired into my account.
Flipper/Rehabber · Allentown, PA · Member since 2011 · 1k+ posts · 701 votes
9y
I think some concepts here are being jumbled.
A finance contingency gives you a way to cancel your contract and recover your deposit.
Waiving financing contingencies is typically (at least in my market) deemed a "cash offer" - but you can close it using cash, HML, conventional, bags of pennies, however you want.
When it comes to showing proof of funds, you can show a bank account, or a pre-approval letter from various places.
If you waive your contingencies, and can't close, the seller is going to keep your deposit.
In most cases when buying foreclosures, if they see a pre-approval from a HML, you're going to need to re-write the contract as financed. In these cases, it's better to just say you're using commercial financing when you make your initial offer. For most institutional sellers, they're not going to have a big problem with HML vs. Cash, and will consider your offer the same.
Investor · The Colony, TX · Member since 2014 · 192 posts · 66 votes
9y
Mark Gallagher What you said is more in line with my thoughts.
Regardless, the man asked for opinions and there's some real self-righteous commentary going around. BP is better than that.
When I buy from a wholesaler and tell him cash, they seem to understand that it's the same as a HML - I've not had problems with my lender, not sure about the issues others have had.
I bought some MLS property before and said cash, no contingencies, and then financed, but I had real cash available just in case financing fell through, and no one seemed to care... Maybe I just got lucky. Never dealt with auction stuff like that, always done financing on the few HUDs I've bought. My 2 cents...
Investor · Princeton, TX · Member since 2014 · 1k+ posts · 1k+ votes
9y
@Mark Gallagher In Texas, a cash offer will almost certainly require proof of funds. Sellers are getting more and more picky. They tend to ask for FULL cash in an account in the name of the person that will take title to the property. Hot markets are fun. LOL Most of them will not execute the contracts without the proof of funds.
In the past, it was certainly more like you said about Pennsylvania. Basically anything without the contingency was considered cash.
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
9y
@Todd Magin I partially agree with @Account Closed that cash means you are paying with cash at closing. It doesn't mean that you have cash in your bank account though. It could also be a line of credit such as a HELOC. If you are able to write a check against the HELOC to get a cashiers check for closing, that is also considered cash. It could also be a line of credit that is not secured against the property.
If you are financing a property, it is not cash because the property is secured against the loan. Someone may argue a HELOC is financing, but for the purposes of the purchase it is actually cash. The HELOC is secured against a different property, not the one you are buying.
I think the definition is really that you are bringing all the funds (cahiers check) to closing yourself. Money in hand versus the bank/lender bringing the funds to closing. If the lender is bringing funds, then the property is secured collateral for the loan. That means it is subject to financing terms.
The reason people want cash offers is to close quickly and avoid problems with financing. Lots of things can go wrong when financing. Cash is considered lower risk.
Lender · Los Angeles, CA · Member since 2015 · 800 posts · 229 votes
9y
@Jeff Rabinowitz Who said anything about not knowing? I understand the difference between all cash and utilizing hard money. Everyone on planet earth knows that there is an inherent difference. The statement I made was that "Lots of people make all cash offers when they're backed by hard money" and they do. In California many realtors accept that and let it go. Yes, you are correct that in a strict adherence to definitions if someone is making a hard money offer then technically it is not all cash, but the practice is still done.
The fact that you made an inflammatory statement about how I run my business when all I did was state the fact that many people make call cash offers using hard money is preposterous. So I think you should apologize because you offended me and made a massive judgement when there should not have been one.
Investor · Pueblo West, CO · Member since 2014 · 310 posts · 213 votes
9y
I think it's a common practice to use hard money when it says "cash offers"
The proof of funds is up to the seller to accept.
I have seen some real estate listing that say "cash offers only, no hard money" I'm not sure how they tell the difference. Maybe the funds have be seasoned in an account for 6 months? Not sure.