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Chald, Home Buyer in Bellevue, WA

Submitting a cash offer but taking out a mortgage before closing?

Asked by Chald, Bellevue, WA Fri Mar 30, 2012

I have cash to purchase a small condo but prefer taking out a mortgage. I am considering submitting a cash offer to increase the chance of my offer being accepted but getting a mortgage before closing. Are there any problems with this approach? Do sellers care as long as I close on time with either cash or a loan?

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9
Mack McCoy’s answer
The seller might care and be concerned that you don't have the cash to close, and they might think that by accepting a cash offer, that they won't be bothered by having an appraiser dropping by. If you can reassure them that you have the funds to close if the loan doesn't work out, they'll probably put up with a visit from an appraiser.

All the best,
1 vote Thank Flag Link Sat Mar 31, 2012
Hello Chald,

Submitting a cash offer is attractive to sellers because it means the property is not put "on hold" waiting for a mortgage contingency to be met. However, the seller may want proof of funds--that is, verification that you are financially capable of purchasing the condo at the price agreed upon. Keep in mind that a lender will require the property to be appraised before granting the loan. If the condo does not appraise out, you won't get the loan. If your offer has been accepted without a mortgage contingency, you will still be obligated to purchase the condo--which shouldn't be a problem if you have the cash and feel that the unit is worth the price you're willing to pay, in spite of the appraisal value, which may not account for all of the reasons you find the unit suitable for you.

Our company has excellent mortgage professionals who would be glad to discuss the process and help you prepare for financing your purchase. Please let me know if you'd like me to send you that contact information, or if I can be of further help.

Dayle Lively
847-507-8832

Baird & Warner
1 vote Thank Flag Link Fri Mar 30, 2012
You should ask yourself and proceed accordingly.
1 vote Thank Flag Link Fri Mar 30, 2012
In a worst case scenario, as long as you are able and prepared to close using cash, if for some reason your loan isn't approved, that should be fine, and the sellers shouldn't care.

The sellers just want to know you will be at the closing no matter what!
Be prepared to accept the house even if it doesnt appraise out.....if you make the appraisal a contingency, your offer will not be as strong.

The sellers will probably ask for "proof of funds" when given a cash offer, so be prepared to respond to that request.

Good luck!
0 votes Thank Flag Link Fri Mar 30, 2012
Most likely a cash offer will not get you a better price, but it will get you more consideration for the strength of your offer. But, tread lightly. A seller can reject an offer if you change the institution that you originally listed in the contract, much less change a cash offer to a mortgage. That change can also change the amount of time it takes to close.
Better yet make an offer with a higher down payment and the rest covered by your lender. Keep in mind that the seller could get multiple offers, and changing the nature of your financial agreement, per your contract, would give them a reason to go with another offer.
0 votes Thank Flag Link Fri Mar 30, 2012
Cash will get you a better price, not huge amounts off, but it will give you more consideration than a non-cash deal, all else being equal. Cash gives you no contingency though, so if you say cash and then can't get the loan or miss the closing date, you will be in jeopardy to lose your earnest. And on a cash deal, earnest is usually more.

Also you are changing the terms of the contract, as the financing is one of the terms. You may be better off buying with cash and then refinancing after closing if you need or want the cash out. Especially with a condo, cash deals go through much faster - less red tape.
0 votes Thank Flag Link Fri Mar 30, 2012
Do you have a financial institution that you are currently working with? I can get a loan closed for you in 2 weeks. Call me if you are interested in talking - 708-259-2279
0 votes Thank Flag Link Fri Mar 30, 2012
If you take out a mortgage after a cash closing, you need to wait 6 months.
0 votes Thank Flag Link Fri Mar 30, 2012
This was done often in the past. The better option is to close with cash then get a mortgage. This definatly works better on a short sale or foreclosure.
0 votes Thank Flag Link Fri Mar 30, 2012
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