All cash offer questions

[Kari Morales]

I was just lost out on another property I was trying to buy. My agent told me that although my offer was higher, I was beat by an all cash offer. This has been repeatedly happening to me.

My agent told me that some people will buy a property “all cash” and then go take out a commercial loan on the property and get the cash out of it and put it on a mortgage. I am not familiar with this, is it common that buyers do this?

If so, how is it done? I am starting to get discouraged after losing out on several properties and I am wondering if I should be doing this too?

[Greg Scott]

Yes, it is something investors do, but not necessarily how you've described it.

If you have the cash, you can buy for cash and then do delayed financing.  You can get agency debt, so a commercial loan is not required. You have six months after purchase to do this.  The results are the same as if you had put in place financing up-front. This works best for a property that is in good condition.

A Hard Money Loan, is effectively cash. If you find a good deal on a fixer-upper, you could make your offer cash, not contingent on financing, and buy using a HML, then doing a rate & term loan once the property is fixed up.

Of course, if you have the cash, you can make it a cash offer, meaning you have no financing contingencies, and still get a loan to buy it.  You just won't be able to delay closing due to financing issues. The seller won't turn you down if you show up with a mortgage at closing, they just want to have a closing assured.