It was early in my real estate career and after humble beginnings trying to establish my name that business began to pick up. I was starting to get referrals, and a friend of mine sent me a customer from a well-known and respected family. I was thrilled at the opportunity to prove myself and so diligently prepared to take this couple out and show them the neighborhood.
The clients were a young married couple with two kids who were leaving Manhattan to find a home in the suburbs. After looking with them a few times we found a home that spoke to them, placed the offer and it was... accepted! I got all excited about the impending deal but, sure enough, an issue arose. As the buyers were very young and relatively new to the workforce, the seller was concerned about their financial ability to qualify for a mortgage and close on the house. That’s when the young client said that she wanted me to talk with her father about the purchase and that he would be calling me later that night.
“Is this Nechama!?!” said the father in a deep, commanding voice. “You tell these sellers they have nothing to worry about. My daughter will be buying this house with all cash!”
All cash? What does that mean? How many attaché cases is that?
I hung up the phone and immediately called my trusted attorney (if you’re reading this, you know who you are) and he immediately began laughing when I raised my concerns. He explained that “all cash” doesn’t mean thousands of $100 bills stacked on a table; it means there will be no bank financing/mortgage contingency in this contract of sale.
And now I understood how this would elevate my customer’s position on the deal.
Especially in today’s market, where a correctly priced home can expect multiple offers, it’s more important than ever to understand how to present your bid in the most attractive way. Oftentimes it’s not just the dollar amount on your offer that matters to a seller. Since most people do not have the funds to purchase a home sitting in their bank account, it is important to demonstrate to the seller how exactly you intend to have these funds available. It is perfectly “de rigueur” for a person to request a mortgage contingency, but all things being equal, if a buyer comes in and says “I do not require a mortgage to purchase this home,” that surely increases the odds that 45 days from now you will show up at your attorney’s office and have a closing.
And here is where a sophisticated buyer with the guidance of a good mortgage broker can make a winning case. Let’s say you find a home you like, and while you don’t have the funds to close on it available in your account, you determine with your mortgage broker that you are an excellent candidate and will have no problem obtaining the financing. With guidance from your real estate agent as well as your attorney the mortgage contingency can be removed from your offer—making you a cash buyer—even if you intend to go for that mortgage. In essence what you have done is obligated yourself to come to the closing. If you do not, in the end, qualify for the mortgage, you will not have recourse to cancel the contract and if you don’t have a rich uncle who can quickly send you the funds, you may be in danger of losing your deposit.
Making an offer like this should only be done in consultation with professionals. For questions or comments feel free to email me at [email protected] or 201.826.8809.
Nechama Polak is the Broker of Record and owner of V and N Group LLC. V & N Realty is located at 1401 Palisade Ave in Teaneck. 201 692 3700. www.vnrealtygroup.com.