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Old 08-13-2013, 08:25 AM
 
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What contingencies should a buyer who is paying all cash (actual cash in hand) request on his all cash offer?

I was thinking title insurance, satisfactory inspection, including termite & radon. But are there other contingencies a smart buyer should request?

Also, with all cash, who holds the escrow money? And is it non-refundable?

Many thanks!
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Old 08-13-2013, 08:37 AM
 
Location: Austin
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It depends on the market you're in. In a strong, multiple offer market, your cash contract shouldn't have any contingencies. If there are contingencies, what's the difference between a seller wanting to move forward with your offer verse another offer?

There is always going to be a title contingency because no title company will insure the transaction without clear title. If you want an inspection contingency, it should be a short period like 5 days.

Basically, if your offer looks like all other offers, there is no benefit to yours.

Again, depending on what state you're in will depend on how the earnest money is held. In Texas, all funds are kept at a title company in their escrow account. Why would the earnest money be refundable? Again, that's the point of a CASH offer--- to have less risk to the seller!!
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Old 08-13-2013, 08:42 AM
 
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Those are good basic contingencies for a cash offer. Depending on where the property is located, a "satisfactory inspection" could include well and septic.

As to who holds the down payment, that should be spelled out in the contract. My preference is to have the ernest money held by the title company--but it could also be held in a broker's trust account...or even given to the Seller (not recommended, but occassionally acceptable). It should be refundable based upon the contingencies, but otherwise non-refundable if you just change your mind.

NOTE: In all of my cash offers I've completed my inspections prior to making an offer, with the exception of environmental assessments since I deal a lot in vacant land (they are simply too expensive to complete without a signed contract in hand).
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Old 08-13-2013, 09:02 AM
 
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Quote:
Originally Posted by staywarm2 View Post
What contingencies should a buyer who is paying all cash (actual cash in hand) request on his all cash offer?
Depends. If its a foreclosure being sold by a bank, they may not accept any contingencies.
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Old 08-13-2013, 10:18 AM
 
Location: Ocala, FL
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As a buyer, you could request that a professional appraisal be completed (at your expense) to determine that the asking price is close to the appraised value, however, the seller could reject such a request. An appraisal is not required in a cash transaction.
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Old 08-13-2013, 11:36 AM
 
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Phrasing will vary with your location, but make sure to word the inspection contingency so it's about your approval of the inspection results, not some objective result. This is the standard way of giving the buyer an out in case something comes up and you don't want the house after all -- even if the inspector says the house is perfect, you can still say you don't approve.

If your market allows it, get a whole-house inspection and a survey, in addition to stuff listed above. Property lines are usually not where the fences or hedges are. Find out where the lines really are. Pest and dryrot inspectors won't look for problems with the roof, electrical, gas, chimney, etc.
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Old 08-13-2013, 11:39 AM
 
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Contingency that the appraisal must be equal to or less than the offered price?

Also, I've heard of people making their offers contingent that the offered sales price is equal to or less than the appraisal value of the home.
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Old 08-13-2013, 12:13 PM
 
Location: Cary, NC
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Quote:
Originally Posted by staywarm2 View Post
Contingency that the appraisal must be equal to or less than the offered price?

Also, I've heard of people making their offers contingent that the offered sales price is equal to or less than the appraisal value of the home.
It is just twisting words around.

If you have an appraisal performed, you want the appraisal opinion to be equal to or more than the contract price of the property you are purchasing.

If you are 100% certain of value, or purchasing a unique property and not worried about appraisal, you may choose not to appraise, but I would not suggest a client unilaterally cede the right to appraise when making the offer.

Our standard NCAR forms here make that parameter default in the contract. I have never had a cash buyer rejected because they would not strike the appraisal clause from the contract. And it would be foolish for a buyer to do so, IMO.
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Old 08-13-2013, 08:30 PM
 
Location: Berkeley Neighborhood, Denver, CO USA
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Default Not for CASH buyers

Quote:
Originally Posted by staywarm2 View Post
Also, I've heard of people making their offers contingent that the offered sales price is equal to or less than the appraisal value of the home.
Only if you need a loan.
If you are making a cash offer, then you "know what the property is worth". An appraisal is silly.
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Old 08-13-2013, 08:58 PM
 
Location: Cary, NC
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Quote:
Originally Posted by davebarnes View Post
Only if you need a loan.
If you are making a cash offer, then you "know what the property is worth". An appraisal is silly.
Actually, a "cash offer" generally means that the buyer will not be financing with a loan. It has little to do with valuation.
I would not counsel cavalierly forfeiting a right to appraisal unless something of value was offered in return.
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