Originally posted by @Jonathan Lane:
@Jeff Copeland to make sure I am clear- you can offer and cash offer BUT you better make sure you have the funding to close the deal: I.e: HML, PML, or the actual cash? So, prior to all of that... communicate with your realtor you want to offer a "cash"offer and get a pre-approval of The funds being used from whatever source you are getting the funds from? my main goal is to take out the financial contingency?
@Jonathan Lane - I have no ideas what your goals are. But for most buyers, the goal is to make your offer better than the other offers on the table, so you actually get the deal you are after.
Look at it this way - Assume for the moment you are the seller, and you receive four offers:
1. Offer 1 is from a wholesaler offering $100k "cash", closing in 10 days, but they did not provide any proof of funds, so you have no idea whether or not the buyer actually has a dime to their name.
2. Offer 2 is from an investor offering $100k, using hard money, closing in 10 days. She called it a cash offer, but included a letter from her hard money or private lender (same thing, really) stating the lender is good to go with the deal, the lender has plenty of liquid cash, the buyer has his 20% down payment and cash for closing costs, and there is no financing contingency.
3. Offer 3 is for $100k, cash, closing in 10 days. Included with the offer is a bank statement showing the buyer has $127k in liquid cash sitting in a checking account at a local bank.
4. Offer 4 is for $102k, closing in 40 days. It is a financed offer with a conventional mortgage, and includes a 30-day financing contingency.
None of the offers have any other contingencies, and the earnest money deposits are all the same ($2500). So, for the sake of this argument, we are just looking at cash versus financing.
Assuming there could be no further negotiations and these were all "highest and best", which offer would you choose?
Most experienced real estate investors would choose Offer #3 in a heartbeat (In fact, I'd argue that most sellers would accept #3 even if it were a lower offer price than the others!). There is literally no risk to the seller; Nothing to go wrong... You sign the offer and you either close in 10 days, or keep the buyer's deposit and start again.
Admittedly, Offer #2 is a close second. But there is still a lot more risk baked in - a lot more moving pieces, a third party is involved, a lot more chances for things to go wrong compared to #3.
Offer #1 is most likely a total waste of time. And offer #4 is a distant last place: The buyer could walk on day 29 if they are unable to secure financing with no consequences. This is typical of retail transactions with conventional financing, and that's why CASH IS KING when it comes to investment properties on the scale we are talking about.
