Isnt hard money same as cash?

Question

I think im a bit confused about hard money. I found a deal that said cash only. given the fact I didn't have that much cash, do not have the network yet to get private funds, I decided to look into a hard money lender. I was told if they want cash then they cant finance it because it is still technically a loan. I was under the impression that for people in my situation dealing w/ cash offers, ppl go to hard money because it was the same. am I misunderstanding? thanks

Andrew Syrios · Answer

Hard money loans are still considered loans. Sellers who want cash only are looking for that because they want a guaranteed close (i.e. they don't want to risk the financing falling through, which can potentially happen on a hard money loan just like a bank loan). That being said, cash only sellers will sometimes take financed offers (assuming it's not an institution with rigid rules). Everything is negotiable.

Jason Hirko · Answer

@Alex Shaughnessy even though a lot of people consider it the same as cash, it isn't. However, if you aren't putting any contingencies on your offers, just 'as-is, where is' then your seller will likely consider it the same, unless they ask for proof of funds or something. You just run the risk of losing your earnest money if you can't deliver.

Bob Green · Answer

Hello Alex,

What you could do if you have cash in the bank is to acquire the property with cash and then use hard money to refinance cash out based % of original purchase price and then set up rehab escrow based on a % of rehab budget to complete property. Does this make sense?

Jeff B. · Answer

Most closing agents insist upon a Wire Transfer or Cashiers checks - - both are considered as Commercial Cash.

Jeff B. · Answer

He CAN ask for Proof Of Funds, but not dictate the origin per se.  Execute your agreements well AND be prepared to HONOR your agreements w/o waffle-words.

Nick C. · Answer

We've bought both ways, we've only been questioned for using hard money twice, both times were banks, and both times we had to use a contract that they came up with. We then signed an addendum allowing the financing and closed.

Nick C. · Answer

@Jack Henry that depends on the contract that's been executed. Here in Florida the Far Bar As Is treats cash as having no contingency for financing, so it really shouldn't matter. It could be argued that having funds available in your bank account isn't cash either. It's never truly cash unless you show up to the closing table with a briefcase full of $100 bills. Not very practical.

Jack Henry · Answer

@Jeff B. does the seller have a say in how you come up with the money, if you can close before the closing date on the contract with financing?

Jeff B. · Answer

It is possible to do one contract with the HML to you and another all-cash to the seller - - it's all in the negotiations on how the HML would get collateral.

Isnt hard money same as cash?

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