Question about all cash short sale

[Lyle M Smith]

Hey BP - Newbie trying to execute my first deal here. I found a SFR outside of Philadelphia that is being sold as a short sale. The property is in rough shape but is listed at ~40% of its ARV. I lined up a hard money lender and ran my numbers and it looks like a promising deal.

Supposedly there was a ton of interest in the property so the listing agent informed my realtor that they would only be accepting cash offers. My hard money lender assured me that my loan would be as good as cash and he supplied me with a proof of funds to share with the listing agent. My main concern is now that I’m basically waiving any appraisal contingency but the hard money lender is still going to need to do an appraisal. I see the risk in this so I am trying to plan some exits before we submit the offer tomorrow.

In the event my offer is accepted and then the hard money lender either can’t get in for an appraisal or the appraisal comes in way lower I’ll be stuck in a cash offer where I dont exactly have all the funds. I’m assuming Im going to put a deposit down and I’ll lose it if I can’t come up with the cash when it’s due. I was thinking I could probably scratch the cash together from family but I also was wondering if I could essentially just wholesale the deal to get out clean.

Most importantly I want to know; Can I assign the contract to another buyer on an all cash short sale? Any and all other advice is welcome on the situation too. Thanks!

[Sebastian Marroquin]

Some things to note: 

You will surely have to get your offer accepted twice. 

1. The fist time by the seller of the short sale (the owner) where the listing agent will likely have some control or at least suggest to the seller who to choose (and hence why they are only looking for a cash offer). 

2. Then once accepted: the offer package will go to the short sale negotiator with the lender associated with the property. 

(so just bc you get it accepted for 40% less than ARV does not mean that the negotiator will accept the offer).

This is why many times, the listing agent for a property will accept an offer that's descent and then go to the bank, get that rejected and then put the real list price on the MLS once they get a verbal from the bank's negotiator.

(the listing agent also does not want to go back and forth with the bank and of course would want to choose someone that can close... ) 

As a Realtor Of course I am going to suggest you have representation on the buy side... but in the case of a short sale, you may have a better chance in getting the deal if you go with the listing agent and then once you renovate the home and are ready to re-sell, be loyal to your original agent and go with them as the listing agent. This way you ensure that they will help you through this initial process. 

If you simply do not know what to do and how to protect yourself, then go with your original buyer rep and try your best. 

Now, you will submit a "cash" offer with your hard money loan, and remove the appraisal and the loan contingency but you will leave 7 to 10 days for your inspection contingency (during which you could do an appraisal with a 3rd party appraiser). Now, most investors would not be scared of that what so ever, bc you were saying that the home is 40% below market .... so why would you be concerned with not getting an appraisal... 

Make sure you have someone competent helping you out (for example: if the last 20 homes sold between $300k and $330k and this one is 40% below at $120k below or $180k why would you be concerned... ) 

To your main concern: about the EMD : you will submit your EMD but you have your investigation contingency in place, so you will do an inspection, and if there are major issues, then you back out of the deal and cancel. Or if the negotiator comes back with a much higher number... which they will... and the deal no longer makes sense... then back out and get your money back.

Yeah... have representation. This is too complicated for you not to :) 

Good luck