Does a Cash Offer Mean All Cash?

25 Replies

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.

Sorry, all cash means all cash and many sellers will want proof of funds (or a pre-approval letter if getting financing).

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!

@Todd Magin , sorry, but Sellers who demand "cash offers only" will NOT accept "I'm very confident in getting financing"! (That is, if they're smart!) 

Even your "proof of funds" must not have ANY contingency!

Which means - you don't NEED to be "confident" - if you HAVE the funds! (eg. HELOC).

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.

@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.

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?

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?

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.

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

Originally posted by @Steve Snyder :

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.

@ Jeff

@Jeff Rabinowitz  Hard money loans frequently fail to close. ... man you must be using the wrong lender.

@Steve Snyder , 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.

@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.

@Steve Snyder , the fact that you do not know that an offer financed by hard money is not a cash offer speaks volumes about the way you run your show.

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.

CD, bank account, Heloc, IRA & Stocks proof. Something can liquidate quickly(days, 2 weeks) to produce a cashier cheque or wiring source.

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.

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.

@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...

@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.

@Todd Magin I partially agree with @Anish Tolia and @Andrew Johnson 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.

Acceptable POF for a "Cash" offer are strictly at the discretion of the seller.

If a seller accepts a letter from the bank that the buyer has "over 120K worth of funds available unsecured" then it is a cash deal

If a seller accepts a buyers dad's account image and a letter saying "Junior can buy a house with this if he wants"

If a seller accepts "IOU 120K cash at closing" it is a cash offer.

The financing contingency falls under how @Mark Gallagher says.

Just my 2 cents.

@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.

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