Making Your Offer as Strong as Possible

The saying, “Cash is king.” Has stood the test of time, yet many real estate investors do not comprehend why. As an investor you may think that your cash makes you king. But the person who has the ability to walk away has control. In order to understand why cash is king you have to walk in the other parties’ shoes.

That person may have had their property fall out of escrow a time or two. There may be a family emergency hat they need the capital for, their marriage may be ending and neither has the ability to buy the other out. They may have found a better investment opportunity and need the cash to secure it. The bottom line is more than likely they feel some sort of distress to rid themselves of the burden of owning the property.

With an all cash offer you do not need the appraisal contingency. This contingency is designed to give the buyer some room and time to have their lending institutions obtain an appraisal from someone they have selected. The lending institutions do the to ensure hey will not be purchasing an asset with a market value less than the loan. When an appraisal come back with equal or higher value there usually is no problem but if the appraised value is lower than the amount sought then the lending institution’s lower the amount, they are willing to risk and the buyer must come up with the difference. Many time the proposed purchaser is unable to come up with the addition cash or they are unwilling to pay more than the appraiser’s opinion of the properties market value. If this has happened to the seller a few times they have been on a rollercoaster of emotions and a lower all cash offer may be more appealing because they can close faster and the Appraiser contingency can be waived.

The other contingency which can be wave is the loan contingency. When you are able to pay cash, you don’t need a loan contingency because you’ll not have a loan.

You could wave the Inspection contingency but you may wish to keep this intact to allow your team to inspect the property to insure it is not in worse condition than what you thought. However, if you intend to demolish the buildings you may wave this contingency also.

When you offer cash, you typically offer a lower amount than those who are trying to obtain a loan, but your time line to close escrow can be much shorter than the borrower’s closing.

You are more likely to purchase the property, because you have removed the possibilities of two and maybe three contingencies effecting the deal. If you are the person who is distress to sale the property, more than likely you view the property as a burden, a cash-drain, and liability,

Thus, the all-cash offer appears as the means to stop the bleeding.  

When you discover these situations, it is best to offer fair market value or be willing to suffer from the reputation which follows low-ballers. There is room in the industry for everyone to walk away seeing themselves as a winner or maybe it’s a deal where you should take control and walk-away.

Note: Images on this blog site are from a free source or taken by the author. No image or group of photos is intended to represent the people the author serves. The author does not care about Race (that is a politically correct term that he does not like because we are all of the same Race, the Human Race. He prefers the term ethnicity, color, religion, sex, gender, marital status, disability, genetic information, national origin, source of income, Veteran or military status, ancestry, citizenship, primary language or immigration status.) He is a service provider for all people. We will all rise together when we band together and help one another. Joseph Erwin is a Real Estate Broker, DRE # O2131799, and a CA general contractor # B 696662. He’s a member of the CRMLS and The East Valley Association of Realtors located in the Inland Empire region of Southern California.