Can I use a Hard Money Loan to buy “Cash Only” listings?
This is a great question, because the simple answer is:
You can use Hard Money Loans to buy properties where the listing says “Cash Only” or “Cash Buyers Only.”
In fact, getting access to leverage on these “Cash Only” deals is one of the best uses of Hard Money Loans, and can give you a competitive advantage over those who are ignorant to the possibility.
While the simple answer is indeed a resounding “Yes!” the more complicated answer is more of a:
That’s because it really depends on the Seller, and their reasoning behind stating a listing is for “Cash Buyers Only.”
The most common reason properties are listed as “Cash Buyers Only” is because the seller knows there’s no way in hell a traditional mortgage from an FDIC insured bank lender will be attainable.
This is usually because the property needs work, and will require significant investment & expertise before it can be sold at retail appraisal value.
This can be a great opportunity for you as an Investor, and as Hard Money Lenders, we understand.
That’s why on this type of “Cash Only” deal, we can not only get you financed, but also help deal with a Seller that is demanding only cash buyers.
However, there are a couple scenarios where this type of “Cash Only” listing can present problems, even with a Hard Money Lender like Glassridge.
Potential Problem #1: The Seller is really strict about “Cash Only,” and requires a Proof Of Funds letter or Bank Statement.
At Glassridge, we can provide a simple Pre-Approval for your transaction to qualified Borrowers at no cost.
We also have a more comprehensive, personalized Letter Of Intent that can be prepared for a document processing fee of $199.
Unfortunately, we do not provide traditional Proof Of Funds letters, and obviously no Seller will let you use our Bank Statements for your transaction.
While we are willing to help you negotiate with the Seller to hopefully get some leeway on these issues, if they’re very strict, it might be impossible.
One example where this occurs is with particular banks or credit unions selling REO properties, since they might be following some non-negotiable corporate policy, for which nothing we can provide will suffice.
Potential Problem #2: The Seller has had a bad experience with some other Hard Money Lender(s) in the past.
The Private Hard Money Lending industry is full of unscrupulous characters & companies.
It’s not uncommon to run into a Seller, especially a professional investor or bank, that has had enough bad experience(s) in the past with other Hard Money Lenders, that they’re turned off the entire subject.
For some, it’s strictly hearing the term “Hard Money” that will instantly turn them away from you as a buyer. For others, simply becoming aware of any 3rd party to their “Cash Only” deal will cause them to reject you completely.
We’re very professional & service oriented, so can sometimes overcome this type of scenario with your help.
However, there’s no guarantees. It will be up to you to keep this in mind and decide how & when to reveal to the Seller that you’re planning to use Private Hard Money Financing.
Potential Problem #3: The Seller is just an insane private individual who is not open to reason.
You may chuckle, but this happens more than you might imagine.
Even though closing a deal with a Hard Money Loan, from the Seller’s perspective, is exactly the same as an all-cash purchase, some people just aren’t open to the idea.
It might be possible to conceal that you’re using Hard Money in these cases, at least until you can get the property under contract & it’s too late for the Seller to turn back…
But this also might be potentially illegal, or at least enough to void your contract depending on its stipulations, so you better consult your attorney.
Beyond resorting to sneaky tricks or difficult negotiating, some peculiar Sellers are impossible to convince that a Hard Money Loan is the same as cash to them, even in spite of our best efforts at presenting documents like your Pre-Approval and Letter Of Intent.
Beyond these 3 Potential Problem scenarios, which are still an overall minority, you will definitely see new deals opening up & new potential opportunities when realizing that “Cash Buyers Only” secretly means “Hard Money Financing is also OK.“