"All Cash Only" in listings

Investor · Atlanta, GA · Member since 2017 · 184 posts · 204 votes

This may be a very quick and obvious answer, but it's something I've questioned for quite a while in my journey, maybe one of you can shed light on it.

Why do RE agent or even FSBO listings sometimes have "All Cash Only" rules in their listing?

From a seller's perspective why would they care where their money comes from, so long as it comes? I understand the cases where a property is in such bad condition that a bank wouldn't likely lend on it, but why set that qualifier straight out of the gate? You don't know what kind of connection I may or may not have with a lending source.

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Mitch Messer

Lender · Playa del Carmen, México · Member since 2014 · 2k+ posts · 1k+ votes

Hey @Evan Parker! This is a great question: Thanks for asking it!

It's really just a matter of risk management for the seller. Dealing with a buyer with all the cash necessary to purchase means they won't be calling you two days before the closing to say their financing fell through and they can no longer buy.

Just in the last 30 days, I've spoken with three different investors who were informed within days of closing that their lender was either withdrawing their financing commitment or radically worsening the terms (unless a sizable fee was paid to them).

Not the buyers fault, perhaps, but that fact doesn't help our seller, who still doesn't get their sale. And getting to keep the buyer's earnest money is cold comfort.

And, this doesn't even take into consideration all the many other legitimate reasons a lender might not fund a deal: appraisal comes in too low, borrower loses their job, change in credit status, etc.

Some sellers just want certainty: When it absolutely, positively has to close, sellers want a buyer with "All Cash!"

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Andrew Cichon
Member since 2020 · 46 posts · 11 votes
6y
Evan - the first thing the comes to mind is all cash deals close very fast. Could be a wholesale deal, sold to a investor who just wants to make his quick flip without putting a nickle into it. Your right, most lenders will not loan on properties. And you know the Atlanta market is still very hot for fix-and flip. Andy
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Mitch Messer
Lender · Playa del Carmen, México · Member since 2014 · 2k+ posts · 1k+ votes
6y
Hey @Evan Parker! This is a great question: Thanks for asking it!

It's really just a matter of risk management for the seller. Dealing with a buyer with all the cash necessary to purchase means they won't be calling you two days before the closing to say their financing fell through and they can no longer buy.

Just in the last 30 days, I've spoken with three different investors who were informed within days of closing that their lender was either withdrawing their financing commitment or radically worsening the terms (unless a sizable fee was paid to them).

Not the buyers fault, perhaps, but that fact doesn't help our seller, who still doesn't get their sale. And getting to keep the buyer's earnest money is cold comfort.

And, this doesn't even take into consideration all the many other legitimate reasons a lender might not fund a deal: appraisal comes in too low, borrower loses their job, change in credit status, etc.

Some sellers just want certainty: When it absolutely, positively has to close, sellers want a buyer with "All Cash!"
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Evan Parker
OP
Investor · Atlanta, GA · Member since 2017 · 184 posts · 204 votes
6y
@Mitch Messer thanks for the response! Makes sense the points you've laid out. I guess I underestimated how common it is for people's financing deal to change that close to closing
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Jim K.
Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
6y
@Evan Parker

There's occasionally a lot of pressure for a seller to make a sale quick to get an asset off the books. The money generated from the sale of the asset is a secondary concern. This is usually something you see around here in low-rate single-family, somewhere around $20K-$40K. If a parent dies suddenly around property tax time and leave their house to a child with no control over their finances, the prospect of coming up with a few thousand for property taxes after paying for the funeral absolutely terrifies a lot of people and can lead them to make bad decisions.
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David M.
Morris County, NJ · Member since 2020 · 5k+ posts · 2k+ votes
6y
@Evan Parker
Besides financing fall through (let’s face it, just as there are bad realtors there are bad loan officers and bad buyers as well), there is also the condition of the property. We are in investment forum here. If you are looking for something to fix up, the property may not be in a condition to even obtain a conforming loan. Very distressed homes do not lend themselves to be financed
Hope that helps. Good luck
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Michael Noto
Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
6y
The simple way to look at it is any contingency in a contract is a risk for the seller. The less contingencies the less risky the seller views the offer.
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Matthew Irish-JonesBusiness Member
Real Estate Agent · Buffalo, NY · Member since 2017 · 2k+ posts · 2k+ votes
6y
@Evan Parker because they know it won’t qualify for financing
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Steve Morris
Real Estate Broker · Portland, OR · Member since 2019 · 4k+ posts · 2k+ votes
6y
"Why do REagent or even FSBO listings sometimes have "All Cash Only" rules in their listing"
1) Quick close needed. Do NOT let that preclude you from INSPECTION
2) Property is NOT financeable. Something like a roof with <5 years life may preclude some types of financing
3) The seller should realize that means a discount from FMV
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