Friday, July 11, 2014

Cash Offers

There have been quite a few all cash transactions this year. It seems that many people are liquidating other assets and using the cash to buy real estate. This shows that there is a strong trust in the stability of the market. It bodes well for the confidence suggested in the strength of our local real estate market.

Cash is convenient in a real estate transaction because the buyer is not waiting on any bank approval, credit check, etc. Once the seller is ready to close the buyer simply signs documents and wires money to title. I love those. Sellers love them too because they tend to be stronger offers. Sometimes a seller will take a lower offer because it is a cash offer and they choose a fast and convenient lower price over a more cumbersome, slower path with a higher price. This can lead to problems if the buyer isn't careful about understanding what cash is.

Sometimes however people just do not understand what cash is. According to Black's Law Dictionary Cash is defined legally as follows :

"Ready money; whatever can be used as money without being converted into another form; that which circulates as money, including bank-bills. Hooper v. Flood, 54 Cal. 221; Dazet v. Landry, 21 Nev. 291, 30 Pac. 1004; Blair v. Wilson, 28 Grat. (Va.) 105; Haviland v. Chace, 39 Barb. (N. Y.) 284.
Law Dictionary: What is CASH? definition of CASH (Black's Law Dictionary)"

Sometimes offers are made on property as cash offers and in reality the cash is not truly liquid. Any buyer making an all cash offer needs to be aware that the funds must be in liquid cash. I have taken many offers with the proof of funds being in an investment account. Technically those funds are not truly liquid. Buyers need to be certain they have their money in liquid cash form, i.e. cash in the bank, well in advance of the closing date. As a listing agent I have learned a lesson that asking the buyer to prove the funds are liquid at least by the end of the inspection period, is a good idea.

I wrote this today because sometimes real estate deals far apart. There are a variety of reasons for this but when they do people can be a little upset. If a buyer presents a cash offer and then can't close because he can't "get" his cash, that buyer is in a tough spot and will very likely lose his earnest money deposit. If the buyer knowingly made a cash offer without having the cash on hand, that could be viewed under the law as fraud. Fraud is very bad.

The lesson here is that cash offers need to be backed up by real cash and real cash in a contract is cash as defined by the law. Black's Legal Dictionary shows that above. Of course as always my standard legal advice is to get legal advice from an attorney. Any legal questions should always be presented to a qualified attorney and decisions about these things should not be made unless one is well advised by proper legal counsel.

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