"Conditional" cash offers - what are they?
In recent years, I've seen offers come in on some of my listings, that from my experience, I'm calling "conditional" cash offers. I'm just shy of calling them "fake" cash offers.
By that, I mean the offer is written by the buyer and buyer's agent as a cash offer, but with some kind of condition written into the contract giving the buyer the option to pursue alternative financing.
These types of offers are not true cash offers. They are usually submitted by some kind of investment group.
These types of offers are not true cash offers. They are usually submitted by some kind of investment group.One of the examples of alternative financing include a condition of having to liquidate one of the properties currently in their investment pool in order to fund this one. And that is definitely not a true cash offer. What that really is from a contractual lens is an offer "subject to" or contingent upon the sale of the buyer's property, commonly referred to as a "contingent offer" in real estate. Those kind of offers or transactions are problematic because as a seller, you have no idea the dynamics behind what it's going to take for that buyer to sell their property. It may cause the transaction of selling your property to go on too long, or to just get cancelled altogether. There are definitely ways of keeping a contingent offer in line, but that's another blog!
Another example is the buyer obtaining a "hard money" loan, which for short definitive purposes means they are getting a loan that is typically at a higher rate, but is fairly easy to get because there is no real underwriting requirements. It's a kind of "bridge financing" that some investor buyers use to temporarily fund a transaction until they can either pay it off with cash, or obtain a conventional loan with a better rate. Nonetheless, that is NOT a cash offer.
definitive purposes means they are getting a loan that is typically at a higher rate, but is fairly easy to get because there is no real underwriting requirements. It's a kind of "bridge financing" that some investor buyers use to temporarily fund a transaction until they can either pay it off with cash, or obtain a conventional loan with a better rate. Nonetheless, that is NOT a cash offer.There are other ways some buyers attempt to slip their offer in as a cash offer, but when you read the contract closely, it's really nothing more than a song and dance they attempt to sound like a cash offer, but in reality it's nothing but hype.
To summarize: REAL cash offers are just that - they already have the liquid cash funds for the entire purchase ready to go, and they provide the seller with a recent bank statement showing those funds available now.
Anything other than that kind of real cash offer is nothing but smoke and mirrors. And a rabbit hole you may want to stay away from.
Ralph Gorgoglione - Broker / Realtor
Metro Life Homes / BRE #02009317
(310) 497-9407 / (800) 591-6121
Web: metrolifehomes.net
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