What does "all cash offer" really mean?

Question

Hello! I just started back studying/reading about real estate investing, and the term "all cash offer" has me a bit confused.

When someone has an "all cash offer" for an investment property, I know it's not really "green cash," but is it in the sense that an investor is paying for a property in full from the proof of funds in their account? Or is "all cash" just another term or scenario of how it's being financed? If it is indeed the money being used from the investors proof of funds, where, normally, does that money come from if they're just starting out in investing?

I hope this makes sense...

Thanks!

JD Martin · Answer

Cash offer means it is not contingent on financing. The actual money on day of closing could come from anywhere. Usually a seller will want to see some proof of funds to sign the contract. You could save the money up, pull it from a 401, get a gift from your uncle, etc. It might even come from financing, i.e. you can still finance it if you have time to close. Cash offers are usually faster closing as well as taking the financing contingency out of the equation.

Frank Hinck · Answer

@Mel Sims

Generally it’s your cash, or cash from a close group of investors who you have quick access to the funds, it could be a HML but most HMLs want you to have 20% skin in the game

Mel Sims · Answer

Thank you all for breaking it down for me. I really appreciate it !

Tommy Adeoye · Answer

As it says "All cash offer' . This simply means the buyer without a lender has enough funds to purchase the property without having to deal with contingencies or bank delays.

Buyers usually use the "all cash offer" to increase their chances of acquiring a property from a seller , this comes very handy when there are multiple interested parties. You are probably wondering who pays cash ?

Here is one instance of back end scenario :

Buyer has a private lender who lends him the cash. Of course terms are agreed upon. Private lender releases funds to buyer, buyer shows proof of funds to seller or buyers agent. If every other aspect of the deal checks out and the numbers don't change, buyer pays seller and then turns around refinances with the bank in order to fulfill his obligation to the private lender. I hope I have not lost you yet?

This is just one method, there are other creative financing options that makes one a "all cash offer" buyer.

In essence, all cash offer usually gets the seller to sometimes agree to a lower asking price and fend off other interested parties.

What does "all cash offer" really mean?

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