Wednesday, July 22, 2015

What A 'Cash' Real Estate Deal Really Is (...and isn't)

Let me begin by saying what a 'cash' real estate deal is not. With rare exception, it is not a shopping bag stuffed with twenties and C-notes plopped down in the middle of a title company closing table next to the HUD statements, complimentary pens, and customary jar of breath mints (although I did once find myself staring, in awe, at a gym bag full of stacked and banded currency in the lap of a potential foreclosure buyer--but I'll save that for another post on another day). 

Also, a 'cash' deal is not always a wired money transfer to the title company on closing day, nor is it necessarily a certified bank check brought by the purchaser for the full purchase amount. Of course, both of these examples are fairly common occurrences when the buyer has already sold and closed on a previous property; or, a corporate relocation company is involved in the deal via an agreed buy-out scenario; or, the purchaser is just plain rich.

The type of 'cash' deal I'm referring to is something more commonly used as a Real Estate 101 negotiation tactic, particularly in a multiple offer situation. Simply put, it is a waiver (and absence) of any 'mortgage contingency' attached to the initial contract. Such a waiver usually does not prohibit a buyer from getting some form of financing--the deal just can't be dependent on it. In other words, the buyer is declaring his/her liquidity for the offered amount, or is absolutely certain in their ability to obtain a real estate loan outside the legal wording of the deal (usually backed by a large bank account, portfolio of paid-off properties, etc). A verified Proof of Funds letter should be required in any case.

And while such 'cash' deal offers (mortgage contingencies waived) may appear to be stronger than offers merely accompanied by a glowing 'pre-approval’  letter on watermarked stationery, the seller should not be too quick to jump. I've found, over the years, that most offers with a 30% - 50% down payment (and the balance financed) close escrow with equal or better success than any of the scenarios mentioned above. Deals that begin as 'cash' sometimes morph into 'financed' after initial acceptance, depending on the savvy of the real estate attorneys involved--and usually after the property has already been flagged as 'Pending' in the MLS and tied-up in Attorney/Inspection Review for a week, or two, or three, or.... At this point, many sellers just decide to move forward and work with the deal they already have in hand rather than killing it (not as easy as it sounds), and re-listing.
Bottom line: at the very the end of the real estate day--if the deal successfully closes escrow, the seller walks with 'cash' anyway; be it from a closed loan, certified bank check, money wired from standing assets, a shopping bag of bundled swag, or otherwise. And that, dear readers, you can take to the bank.