Pat Kennedy - Your Washington, DC Real Estate Connection

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With All Cash Offers or Financing - Show Me The Money!

If you are planning to buy a property in Washington, DC, our boiler-plate purchase agreements include the details of how you intend to get the funds to complete the sale.  And many firms will ask you to fill out a detailed financial information sheet listing you assets and debts.  Before a seller takes a home off the market, they'll want to know that their buyer is able to buy.  

Financing is spelled out in the contract - the amount of your mortgage, your down-payment, and any contingencies that could impact your ability to make it all the way to the settlement table.  And if you plan to get a mortgage, it will be important to submit a pre-approval letter from a reputable lender.

But what if there isn't going to be any financing?  

Many buyers think that cash is king.  They expect that a seller will find a cash offer more attractive, and many will.  But you will normally have to show that you actually do have liquid assets you need to finalize the purchase.  

What do you need?  You needn't show the sellers all of your assets, only that you have enough to cover the sales price and closing costs.  Typically cash buyers will provide something from their banker or, if the money is in stocks, a statement from a brokerage account.  

It's not unusual for cash buyers to want to get a mortgage because they need the tax deduction - they have the assets that would enable them to write a check to buy their new home, but they choose to get financing.  If they can arrange things in time to settle, that's fine.  But if there are delays, they may have to liquidate assets to reach the settlement table and close on the mortgage at a later date.

There are also buyers who write offers that are not contingent on financing, even though they don't have the assets to pay cash for their property.  This is fine, as long as you have been pre-approved for your mortgage, and accompany your offer with a financial information sheet indicating you have funds you'll need for your down payment and closing costs.  But it's not the same thing as a cash offer.

It's important to remember that whether the funds to settle come from the bank providing the mortgage or the sellers' bank account, the seller will not see a real difference on her side of the HUD-1 settlement sheet.  

Remember the movie "Jerry Maguire"?  It had a great scene - "Show me the money!"  

And when you buy a house, yes, you'll have to do just that!

Comment balloon 3 commentsPatricia Kennedy • December 14 2013 07:53PM

Comments

Hi Pat, Our contract out here requires all Buyer to provide proof of available funds to close. 

Posted by William Johnson, Retired Real Estate Professional (Retired) almost 7 years ago

Hi Pat - That's a great point - an offer without a credible proof of ability to close can't really be considered a serious offer. But we've never seen a detailed financial information sheet requested or provided, and in our market, I doubt buyers would be willing to provide that level of detail on most transactions.

Posted by Dick Greenberg, Northern Colorado Residential Real Estate (New Paradigm Partners LLC) almost 7 years ago

William, our contracts don't, but custom does.

And Dick, We let buyers know that, when they fill out the disclosures, they don't need to disclose all of their assets as long as they show enough to make it to the settlement table, and we also advise them to not underestimate liabilities.  And when I'm representing the buyer, I try to get by with a really strong preapproval letter from a great local lender.

Posted by Patricia Kennedy, Home in the Capital (RLAH Real Estate) almost 7 years ago

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