In the past week we have talked to two different people who say they are making an all cash offer on a property. In both cases there is a private lender involved and I am sorry to burst your bubble people, but it’s not an all cash offer.
The response I received was that in their training class they were told that private money and hard money were the same as an all cash offer. And maybe the training said to write the offer that way.
Sorry, the guru training is wrong.
Yes, private money and hard money that can be turned around quickly can be considered as fast as a cash offer. However, unless the closing funds are being wired to the title company and no loan documents are going to be filed and no notation of a loan is going to be on the settlement statement, then you are getting a loan.
I am a lender in a deal right now and I received a copy of the contract and the contract says it is an all cash offer, there is no mention of lender. And I am thinking, hey wait a minute, I am lending money on this.
So first for those of you writing offers on real estate that involve a Realtor. Sure you can write the offer as an all cash offer. However, when your Realtor office file gets audited by the state and they compare the contract that says all cash and the settlement statement that shows a loan, then the Realtor and their Broker are going to be in trouble.
Secondly, I don’t know title company rules, but when they get a contract that says all cash, then they are not looking for loan documents or preparing the lender’s title policy. I have had some title companies want an amendment and some who don’t, but I would think that the state auditors of Title Company Files would want the closing statement and the contract to match.
Third, as a buyer, unless the money for the deal is sitting in my account already, I would want the out that having it be a financed deal on my contract, just in case I needed an out on the contract, like the lender changed their mind for what ever reason.
So the next time you are writing an offer, remember, if there will be a promissory note and a mortgage or deed of trust filed and if the loan will show up on the settlement statement you are NOT making a cash offer, but rather a financed offer.