If I am doing an all cash offer with no loan contingency but option for hard money loan in purchase agreement, do we still need to obtain an appraisal

Asked by I Don't Know Anything, Ottawa, Toledo, OH Thu Mar 24, 2011

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34
Jane Grant, Agent, Aguanga, CA
Fri Mar 25, 2011
A loan is a loan is a loan is a loan...and a hard money loan is still a loan. Cash means no loan. Hard money lenders will require an appraisal and until you have a formal written loan approval from that hard money lender you have a "Loan Contingency", attached with your offer.

A cash offer is meaningless unless you have CASH that can be identified and proven on a bank statement, or funds can be verified by calling your bank.

There is no such thing as a cash offer that comes with any type of loan contingency, hard money or not, it is STILL a loan!

~~~~~~~~~~~~~
2 votes
John Juarez, Agent, Fremont, CA
Thu Mar 24, 2011
If you are writing a cash offer with an option for a loan you are make an offer that is in conflict with itself. It is either a cash offer or it is not. If I am presented with an offer that may be cash and may not be, I don’t know what I am being offered. I would have to be conservative and insist that you have financing if I am going to agree to accept your offer. I would insist on a loan approval and proof of down payment and closing cost funds like any financed purchase. I think the basis of your offer is confusing.

Hard money lenders rely on the equity in the property as cushion against non-payment. How can the lender feel comfortable with the property value without an appraisal? In any event, the lender will set the terms of the loan such as whether an appraisal is required or not.
1 vote
Dallas Texas, Agent, Dallas, TN
Thu Mar 24, 2011
I would never purchase a home w/o an appraisal. I would be surprised any HML would approve the purchase

Lynn911 Dallas Realtor & Consultant, Loan Officer, Credit Repair Advisor
The Michael Group - Dallas Business Journal Top Ranked Realtors
972-699-9111
http://www.lynn911.com
1 vote
Yahooser, Home Buyer, Los Angeles, CA
Fri Aug 26, 2016
I'm a hard money lender. You can represent yourself as a cash buyer when using hard money.
HOWEVER, you always require an appraisal/inspection contingency in case I balk at the deal, you still have an exit to walk away from the deal. Since we close in 5-7 business days like most other HML, you are all good. Never hurts to still ask for a 30 day escrow.
0 votes
Yanni Raz, Mortgage Broker Or Lender, los angeles, CA
Sat Sep 29, 2012
The appraisal depends on you and/or the hard money lender you use.
Some hard money lenders will look on the computer and will see a great deal that don't need any time wasted, so they will do it with no appraisal.

I attached here a link of great Hard money lenders in California, maybe they can help you.
They have great interest rates and points.

Good luck
Web Reference:  http://hardmoneyloans.org
0 votes
Yanni Raz, Mortgage Broker Or Lender, los angeles, CA
Sat Sep 29, 2012
The appraisal depends on you and/or the hard money lender you use.
Some hard money lenders will look on the computer and will see a great deal that don't need any time wasted, so they will do it with no appraisal.

I attached here a link of great Hard money lenders in California, maybe they can help you.
They have great interest rates and points.

Good luck
Web Reference:  http://hardmoneyloans.org
0 votes
Spirit Messi…, Agent, Tucson, AZ
Sat Jun 18, 2011
Um, why in the world would you NOT include "contingent on appraisal? I have worked many cash deals and personally, I would not write a contract with out it, not worth the liability.
0 votes
Marc McDavid, , Upper Marlboro, MD
Sat Jun 18, 2011
Yes you would still need an appraisal.
0 votes
Don Tepper, Agent, Burke, VA
Fri Jun 17, 2011
All cash offer with option for hard money loan: Yes.

The reason: The hard money lender will want to do an appraisal. The loan will be based on the value of the property, so the hard money lender will require an appraisal.

When investors do this, they make absolutely sure that there's a contingency in the contract covering the appraisal. Sometimes it's stated that way. Sometimes it's a more vague: "Subject to approval of partners." One of the "partners" is the hard money lender.

If it were an all cash offer, and you had the cash yourself: No.
0 votes
Heather Paul, Agent, Santa Monica, CA
Tue Apr 5, 2011
Hello New to the Game, you are going to have to decide if it is really an all cash deal or a loan, if there is a possibility you will be needing a loan-you do not want to write up your offer without including the loan contingencies as you could lose your deposit or money put down if you can not get the loan. How much are you looking to spend? Also, if you are doing a hard money loan-99% of the time the lender providing the hard money loan is going to do an appraisal or require one. I would ask the lender you are thinking of getting the hard money loan for a list of their full requirements, this should help you a lot. You definitely sound like you need the advice of a good local real estate agent, I wouldn't ever recommend submitting an offer without one, they will have your best interests at hand & completely assist you through the process all the way to closing.

Feel free to contact me anytime with questions you may have,
Have a great day,
Heather Paul, Realtor
Coldwell Banker
(310)586-0364
0 votes
David Cooper, Agent, Los Angeles, CA
Sun Mar 27, 2011
If you are even think of a hard money loan, you might want to get your hard money lender requirements before writing up the purchase agreement. Any hard money lender will tell you how this is done, most real estate agents don't work hard money loans.


David Cooper. Las Vegas Foreclosure Investor in Bank Owned Cash flow Houses. FReee List +1-7024997037...
not a real estate agent. ask about limited partnerships
0 votes
Judi Monday,…, Agent, Green Valley, AZ
Sat Mar 26, 2011
Dear New To The Game,

First of all, are you do an all cash offer or a loan? While there is a loan contingency in the purchase contract, you will have waived it by making an all cash offer. Next, no matter what type of lender you decide to use, they are more than likely going to require an appraisal. AND, even if you do decide to go all cash...an appraisal is not a bad idea.

Best of Luck!
0 votes
John Juarez, Agent, Fremont, CA
Sat Mar 26, 2011
Thanks, John Arendsen. But I need at least twenty-five characters to say that.
0 votes
Alisha Chen, Agent, Irvine, CA
Fri Mar 25, 2011
Hello...if you've decided to do a loan, an appraisal is required...if you want to purchase the property with CASH, it is not required but I would recommend it so you have a piece of mind of the market value. Hope this helps!
0 votes
Kathleen Bec…, Agent, Santa Monica, CA
Fri Mar 25, 2011
It's always good to get an appraisal, which will establish and justify the value of the property upon the purchase date. There is also an appraisal contingency in your purchase contract, unless your buyer waived it. And yes, Mr. King below is correct that if your buyer decides to get a hard money loan, the lender may require an appraisal.

Good luck!
0 votes
Lance King, Agent, San Francisco, CA
Fri Mar 25, 2011
New,

If I am reading your post correctly, you have the money to do a cash offer and are willing to pay cash if necessary, but are reserving the right to get a hard money loan to close the deal. If this true, you will need an appraisal for the loan, in which case you would at the very least have an appraisal contingency. You could however make an offer without a loan contingency provided you are prepared to close the deal with cash.

We just structured a deal for someone yesterday who had cash, wanted a loan, but hadn't been approved yet. No loan contingency, but with an appraisal contingency (even with cash it's a good idea to get some sense of value from an appraisal),

Assuming you are prepared to pay cash, putting your offer in without a loan contingency will make your offer stronger, but in my view you should have an appraisal either way.

Best Regards,

Lance King/Owner-Managing Broker
lance@fixedrateproperties.com
415.722.5549
DRE# 01384425
0 votes
John Arendsen, Agent, Leucadia, CA
Fri Mar 25, 2011
I couldn't agree more. Great answer Jane. BTW, do you have any really good distressed property up your way. We will be looking at three in Temecula in the next week and would love to add more to our field trip and shopping list.

We're a RE broker, general contractor and investor all rolled into one tightly wrapped package. We love networking and partnering on deals.
0 votes
John Arendsen, Agent, Leucadia, CA
Fri Mar 25, 2011
Great answer John Juarez. You get my vote for best answer.
0 votes
Carole Schif…, Agent, Los Angeles, CA
Thu Mar 24, 2011
Hi:

Great question... It is totally your choice as to if you get an appraisal when you are paying cash for a property, but the minute you involve a lender, any kind of lender they will require that you obtain an appraisal. About 50% of my transactions are all cash and as the terms of the transaction does not change (they do not get a loan), they do not obtain an appraisal.
0 votes
Steven Ornel…, Agent, Fremont, CA
Thu Mar 24, 2011
New To The Game:

Seems to me your question has been addressed. Now, a question for you:

Why wouldn't you want to have an appraisal (and the contingency) to possibly lower your purchase price and/or confirm that you are purchasing a property that already has equity?

Best, Steve
0 votes
Janey Bishop, Agent, Calabasas, CA
Thu Mar 24, 2011
Usually it is the lender that requires and orders the appraisal so you need to check with lender. You should also have a realtor advising you on your specific information. It's the best money you will invest or not if the Seller pays the commission.
0 votes
Brian Petrel…, Agent, Highlands Ranch, CO
Thu Mar 24, 2011
It all depends on the lender and their requirements. If you opt for the cash option, make sure you're comfortable with the value.
Web Reference:  http://www.brianpetrelli.com
0 votes
John Arendsen, Agent, Leucadia, CA
Thu Mar 24, 2011
Great questions Mike? I don't think I've seen them addressed.
0 votes
George Guerr…, Agent, Holland, MI
Thu Mar 24, 2011
do you think the home is worth what your paying for it? if you don't. no problem, remember you want to make it a good investment. who came up with the price? did you run some comps to make sure it was priced right.
0 votes
Dp2, , Virginia
Thu Mar 24, 2011
Some hard money lenders might be willing to go with a BPO, and others will require a borrower to get an appraisal.
0 votes
Richard Schu…, Agent, Los Angeles, CA
Thu Mar 24, 2011
Only if your lender requires it.

-Richard
0 votes
John Arendsen, Agent, Leucadia, CA
Thu Mar 24, 2011
Anytime you deal with any lender you will need an appraisal. I deal with hard money daily and the first thing they will do is call for an appraisal. Even if you're paying cash you'd be very wise to know what your investment is worth.
0 votes
Marc J. Robi…, Agent, Beverly Hills, CA
Thu Mar 24, 2011
Up to the hard money lender.
0 votes
Peter Stewart, Agent, Indianapolis, IN
Thu Mar 24, 2011
Ask the hard money lender. If they don't require it then you don't have to do one.
0 votes
David Cooper, Agent, Los Angeles, CA
Thu Mar 24, 2011
I would call your hard money lender or a few of them and get their requirements.

David Cooper Las Vegas Foreclosure Investor in Cash Flow Houses. FReee List _1-7024997037
davidcooper@lasvegaswinner.org not a real estate agent
0 votes
Ron Escobar -…, Agent, Beverly Hills, CA
Thu Mar 24, 2011
It depends on your hard money lender...The ones I use sometimes take my broker price opinion, but others do require appraisal...
Make sure you get title insurance!
Web Reference:  http://select-realestate.com
0 votes
Jo Ann Abella…, Agent, Ewa Beach, HI
Thu Mar 24, 2011
A private/hard money lender will also require an appraisal, as these lenders will base their underwriting to the loan to value as well - the more equity, the better for them. From my experience representing investors going thru private money, yes - they require an appraisal, too..
0 votes
Glen Mitchell, Agent, Half Moon Bay, CA
Thu Mar 24, 2011
If I were the hard money lender I would want an appraisal. HMLs still go off ratios of home value.

Glen
0 votes
Sally Grenier, Agent, Boulder, CO
Thu Mar 24, 2011
An appraisal is usually only required by a lender. If you're paying cash, you won't need one.
0 votes
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