Financing in 91101>Question Details

newinvestor,  in 91106

Is it possible to finance an all cash offer?

Asked by newinvestor, 91106 Fri Mar 12, 2010

I would like to put in an all cash offer for a short sale property to be more competitive. Would it be possible to finance the purchase subsequently? Would I have to close escrow with all cash first and then get home equity finacing after? Or just show proof of funds to the seller at the time of offer and then get a loan during escrow? Thanks

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Ken -

First, although logical that all cash offer may be more competitive, short sale approvals very rarely come about in a logical fashion. Cash offer buyers are most likely to cancel the contract (while waiting on short sale approval) and go to the next "deal". REOs are more likely to prefer the cash offer because of assumed quick close. However, with short sales that card does not get played.

The contract implies the "terms" of the purchase and this clearly would cover how the buyer is to pay for it. If you place an all cash offer within the contract terms and during escrow switch gears to a loan you could cause more issues. The bottom line if the lender gets its pay off, most likely no harm is done. However, if something goes wrong (say a low appraisal) your deposit could be at risk due to the "good faith" burden of proof. Were you acting in good faith when you wrote an all cash offer when your intention was to finance?

In regards to the timing of financing an all cash offer that has closed escrow, I do believe there is a time limit that most lenders require. (Within 3 months of purchase comes to mind.) I also believe there may additional cost associated with the loan but will recommend you talk with a loan officer to be sure of any post close implications.

Good luck,
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3 votes Thank Flag Link Fri Mar 12, 2010
Looks like you have mixed answers. Basically two agents hit on the right answer. The contract you sign is the guide. If you say all cash up front and then try to switch during escrow the sellers could always say "breach of contract". That would apply with the bank or the homeowner. A homeowner could say, "breach of contract" and push to have the house put back on the market. That means they get to live in the house another month, probably without making mortgage payments. On the bank side, it could go back to the negotiator and then it would delay the process while the negotiation was going on, probably in some other state.

Also, with most listings, in the agent private remarks. will be a request proof of funds for an all cash offer. If you do not have proof of funds, they will question it.

Normally, lenders will require 6 months for seasoning before they allow you an equity line. You might find a less reputable lender that will allow you to take out cash sooner but beware of the fine print.

To be competative, there are several things you can do to move yourself to the front of the line. Please give me a call or email me and I will be happy to explain them to you.

tommy lee
2 votes Thank Flag Link Thu Mar 18, 2010
You can always elimate other buyers/competition with a All-Cash offer to purchase.
But the seller/lender would like to see the proof of funds. You could always take equity line after you bought the property. As investor you could get lowest & best pricing.
1 vote Thank Flag Link Fri Mar 12, 2010
You CAN use an appraisal as an issue. Just because you pay cash does NOT mean you should pay over the appraised price. Make sure that appraisal and inspection contingencies are in your contract. They protect you. Do not remove them when the banks asks.
1 vote Thank Flag Link Fri Mar 12, 2010
You can make a all cash offer with no loan contingencie, and try to get financing for the property at the same time. Most Agents would think it's a bait and switch, but at end if the result is the same and there is no delays it is possible. Some short sale lenders do put clause's in the contract that if anything changes in the transaction that it could be subject to cancelation.

Edward Uriarte
Cherry Creek Mortgage
(626) 817-2449
1 vote Thank Flag Link Fri Mar 12, 2010
Keep in mind that banks are looking to get as much money back as possible--therefore an all cash offer may not be accepted if there is/are other higher offers with good terms--in the end it doesn't really matter if all cash or loan--what is your agent advising, he/she is your best source of information.
1 vote Thank Flag Link Fri Mar 12, 2010
Hello Ken,

If you have interest in writing an offer that is all cash, make sure you have other contingencies in place (inspection for example) so you can switch to a loan as you would not be able to use loan or appraisal as an issue if you decide to back out. If you qualify for a loan you could switch to all financing once escrow is opened. I would get a loan during escrow.


Monique Carrabba
The Carrabba Group
Keller Williams Hollywood Hills
(323) 899-2900
1 vote Thank Flag Link Fri Mar 12, 2010
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