Cash Offers Only
Hard Money Loans

If you’ve ever looked online for a fixer-upper, you’ve probably come across a house or two in rough shape with a listing description of: “CASH OFFERS ONLY!” These properties are considered “investor specials” or “handyman specials.” The homes are in such bad shape that they won’t pass for conventional financing. Therefore, only cash offers or hard money loan-financed offers will be accepted. First Capital Trust Deeds (FCTD) has years of experience helping investors navigate this process.

This article will discuss how real estate investors can use hard money financing to quickly purchase cash offers only listings. I’ll cover the following topics:

• What is a cash offers only listing?

• What are the most common cash offers only listings?

• How to use hard money loans to buy cash offers only listings

What is a Cash Offers Only Listing?

A cash offers only listing is just what it implies: a real estate listing where the seller only accepts cash offers for their property. A prospective buyer must be able to pay the entire purchase price in cash – without a mortgage. Cash offers only listings are often used for properties that are in poor condition or have other issues that make them difficult to finance through traditional means. These listings can also be used to attract investors or house-flippers.

What are the Most Common Cash Offers Only Listings?

The most common cash buyers only listings are probate sales and real estate owned (REO), which are foreclosed properties taken back by the bank or lender.

Cash-Only Buyers for Probate Listings

A probate real estate listing is for a property that is being sold as part of the probate process. Probate is the legal process by which a deceased person's estate is settled and their assets, including real estate, are distributed to heirs or beneficiaries. If the deceased person owned real estate at the time of their death, the property may need to be sold to pay off debts or distribute assets to heirs.

In a probate real estate listing, the property is sold by the court-appointed executor or estate administrator. The listings often include specific language related to the probate status of the property, such as "subject to court approval" or "sold as-is, with no warranties or representations.”

Cash Offers Only for REO Listings

A “Real Estate Owned” (REO) listing is a type of real estate listing where the property is repossessed and owned by a bank or other lender after going through the foreclosure process.

When a lender takes possession of an REO property, they typically try to sell it as quickly as possible to recoup their losses. This is where REO listings come into play. The property is listed on the market, often at a lower price to attract buyers.

Cash Offers Only For Homes With Unpermitted Improvements

Unpermitted improvements are home additions or renovations made without obtaining the required permits and approvals from the local government. When a homeowner makes changes to their property, such as adding a room, building a garage, or making structural modifications, they’re usually required to obtain permits and inspections to ensure compliance with local building codes and safety regulations.

Cash Offers Only For Unfinanceable Properties

There are several factors that can make a property unfinanceable through a traditional mortgage loan. Some of the most common reasons include:

1. Property condition: If a property is in very poor condition and requires extensive repairs, a lender may deem it unfinanceable. They need to ensure the property is habitable and meets certain safety standards before approving a mortgage loan.
2. Property type: Certain types of properties, such as commercial properties, may be difficult to finance with a traditional mortgage loan. Lenders may have more stringent requirements for these types of properties, or may require a higher down payment or interest rate.
3. Title issues: If there are title issues with a property, such as liens, judgments, or other encumbrances, it may be unfinanceable. Lenders don’t want outstanding claims against the property that could affect their ability to recoup their investment if the borrower defaults on the loan.
4. Location: The property location can also affect its financeability. For example, if a property is in a high-risk flood zone or an area with high crime rates, lenders may be hesitant to approve a mortgage loan.
5. Zoning or land use issues: If a property has zoning or land use issues, such as being zoned commercial but used as a residential property, it may be unfinanceable.

How To Use Hard Money Loans To Buy Cash Offers Only Listings

The “cash buyers only” listings should really just say, “CASH AND HARD MONEY LOAN OFFERS ONLY” since so many of these investor specials are sold to buyers that used hard money to close on the sale. FCTD has funded numerous loans on cash only listings. Most real estate agents operating in the probate and REO niche spaces will accept a hard money financed offer – even when the listing description specifies “cash only.”

Get Approved Prior To Submitting An Offer

If you’re interested in buying a fixer-upper, but don’t have several hundred thousand dollars in the bank to close and renovate the property, you’ll need to get pre-approved for hard money financing for your offer to be taken seriously.

Below is what you need to provide and what we’ll verify before issuing a hard money pre-approval letter:

• Application
  (including your track record of buying, selling, real estate investments, or construction history)
• Credit Check
• Background Check
  (looking for judgments, tax liens, prior foreclosures, convictions, lawsuits, etc.)
• Verification of Deposit
  (hard money loan will require 20-30% down payment)
• Entity Information
  (active and in good standing)

Once you’re pre-approved, you can submit the approval letter with your offer. If you have one of the top offers, the listing agent will call to verify how much due diligence we’ve done on the borrower. (Some pre-approval letters are disingenuous and the broker or lender hasn’t verified any of the borrower’s information). If an appraisal or broker price opinion (BPO) is required, we’ll notify the agent that we need an appraisal and get the contact information to gain entry into the property.

After Your Hard Money Financed Offer is Accepted

When your offer is accepted, an appraisal or BPO is ordered. If the rehab work will be financed, you or your general contractor (GC) will provide a budget. The appraiser uses the rehab budget to determine the property’s future value, or After Repair Value (ARV), based on other comparable properties. The appraisal will have both an AS-IS and ARV value, which will determine loan amounts for both the purchase and the rehab. (It’s an equation, which we cover in the fix & flip/rehab section). This appraisal usually takes about 5-10 days.

After the appraisal is in, loan docs are drafted and sent to escrow to schedule a signing, assuming everything is ready on the seller side. Sometimes with REO and probate sales, a few items can spring up that delay closing.

Once you’ve signed your loan docs, you email them back to the broker or lender to review and ensure every “i” is dotted and “t” crossed. They’ll then verify the down payment funds came from the same account used to verify down payment funds during the pre-approval due diligence period. If everything checks out, the loan is funded, the title records, and funds are disbursed.

The entire process can be as fast as 4-5 days if the appraisal or BPO can be turned around fast – and both buyer and seller have everything needed to close. However, since it’s a real estate transaction, delays are inevitable, but can be addressed to keep everything moving forward.

Conclusion

If you’re interested in using hard money to buy a “CASH OFFERS ONLY” fixer-upper, which is most likely an REO or probate listing, you’ll want to get pre-approved prior to submitting your financed offer. Getting approved means providing your application, bank statements, and entity information to kickstart the credit and background checks process. This way, you’ll be in the running to get one of these cash offers only properties with hard money financing.
Connect with FCTD today to help you find financing for a cash offer only deal.