Not all "cash buyers" really are cash buyers...
the all-cash head fake
By justme Follow Fri, 9 Nov 2012, 5:04pm 1,262 views 15 comments
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justme says
Its really lame for journalist to state cash vs mortgage.. since majority ( up to 99%) RE contract is closed and settled "in cash" vs seller getting a note. So having a buyer be "all cash" or mortgage is irrelevant matter. How the buyer finances a purchase is a matter between Buyer and Banker.
Decades ago did I like everyone else buy their home "all cash"..
yes and I financed it.. without the the interest and knowledge of seller(s).
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Real or not, it doesn't make a difference. If you can get a good deal with your cash or anyone's cash, there's an incentive to do it. There's no reason to take on all the risk when the lenders are willing to take on 80% of the risk at 4% interest rate. It is financially stupid not to get it financed after purchased IMO.
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I've been saying for awhile that cash purchase are just delayed financing. No New news. Over the past couple of years, several dozen colleagues bought home, some all cash, but without exception, finances it.
As E-Man said, it is financially stupid to take 100% of the equity when borrowing cost net of tax deduction is less than inflation.
And just to add a little more color, in almost all case, the delayed financing are floating rate variety, anywhere from 2.25%-2.75%. People who buys expensive (1.5M+) homes do not utilize 30 years.
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thomaswong.1986 says
Not true. If the buyer's contract is contingent on financing, and appraisal, the seller takes a very real chance of the buyer failing to perform. And, that buyer will get his/her earnest money back.
In a cash offer, if the buyer fails to buy the home, the seller can cancel and generally keep the earnest money.
A cash offer with verified funds is a much more sure deal than ANY financed offer.
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robertoaribas says
along with your bank and investment statements, complete list of other assets and a count of you change in your pockets...
its no wonder many were fleeced out of their savings.
it only shows how naive the public has become when buying RE over the past 10-12 years. YOU NEVER tell the other side about your financial well being. That is not for them to know.
this is why you have a lawyer.. to look out for your interest.
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robertoaribas says
really ? .. is that true in california as well regarding breach of contract laws..... carefully now !
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thomaswong.1986 says
Typical statement form someone who has no clue... When a buyer with a million dollars in cash makes an offer of $100K on an investment home, nobody thinks they'll pay more just because they have more...
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Is delayed-financing considered a purchase-money loan in CA?
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robertoaribas says
you are not being very honest here.. of course you dont disclose your financial position. whats the point of negotiating if they already know ...
the typical buyer pulled every dime out of their savings and then some...
they were not good negotiations and got taken to the cleaners.
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thomaswong.1986 says
The typical buyer is not an all-cash buyer though...
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Peter P says
generally, yes. Delayed financing has several advantages:
1. Save a deal when the the lender isn't ready by the close of escrow. Many transactions can't be delayed, especially if the bank is ready to foreclose on a short sale.
2. Homes that can't be financed due to some condition. (leaky roof, etc.) you buy it cash, quickly fix the problem, get an appraisal and get a loan.
3. Multiple offers. The seller will sometimes take a lower cash offer, in order to have less concerns that the home will sell. [appraisal issue, qualifying for the loan could derail a normal sale]
Thomas, you have zero clue. You can't write a cash offer without showing proof of funds. hell, you generally need proof of funds for the downpayment on a normal purchase, and in any competitive market, your offer will get ignored unless you absolutely prove your ability to buy it on the terms offered. I have an idea! why don't we let the person who has bought over a dozen homes this way and actually knows what he is talking about, tell it like it is, fair enough?
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robertoaribas says
there is no requirement of such kind in contract laws.. you know that.
all contract deals are done on good faith...
there isnt any due diligent requirements here.
and if there were.. i tell them... "talk to my bank" and "good luck"...
the common person has lost their common senses
again buyers ignorance is being used against them...
every buyer should at minimal get a lawyer... or they will get shafted from day 1.
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Roberto hit it dead on. There are many times when an all cash offer is the only way to close a deal. Especially right now! Banks are taking forever and forcing people to jump through hoops to get a loan. Get the property into your name with cash, and then work on getting the money back out.
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pkennedy says
Yep. You have plenty of time to jump through hoops after you got the property for cheap.
@Pkennedy, don't forget to mail the deposit check to the title company tomorrow morning. Also, please get the loan docs going immediately. Tomorrow is 11/12. It's passed the 6 months seasoning.
Cheers. :)
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thomaswong.1986 says
Actually, any lawyer with experience in the matter will tell you that proof of funds is an essential component of a cash offer. I do a ton of commercial transactions where (depending upon the type of business, issues with the property, etc.) financing is difficult to get, and cash is king.
However, I have also found that roughly 75% of the time that someone makes a "cash offer" but doesnt provide proof of funds, its because they dont have the cash.
When you inquire why no proof of funds, what usually follows is a parade of excues - "I dont have the cash but I will get it soon" or "I dont have the cash but I have this asset which I will sell for cash (and then half the time they dont do that)" or some other excuse which largely ends up being a waste of time and attorneys fees.
Thus, if I am Buyer's counsel, and my client wants to do cash offer, no proof of funds, I immediately ask why he wants to portray to the other side "there is a 75% chance I am a liar and I really dont have the cash".
Likewise, if I am Seller's counsel, and his broker brings 3 "all cash" offers and 2 of them do not provide proof of funds, I note there is a very good chance these 2 guys are liars and (unless they can prove funds ASAP) go with the third who has already demonstrated he has the funds and is serious about moving forward.