All cash at asking vs financed strong over-asking

Personally I will take the all cash deal just because you can close within a month.

OR take the strong over asking deal with NO MORTGAGE CONTIGENCY.

Got it. I guess I will lose my offer (the one I made with financing) to an all cash offer :(

i think 50% financed is pretty strong offer.

also add that you are willing to pick up any appraisal shortfall up to a low appraisal amount. I would accept that as a seller over an all cash at ask.

Is this a $600,000 apartment or a $1.2MM apartment? that makes a difference as to how strong the extra $15K is -- but that said, most of my sellers would take the all cash.

ali r.
DG Neary Realty

I think the 15k value decision also depends on what % over purchase price its at.

If I am the seller, I'd make the cash offer come up or I'd figure out myself what is the likelihood the higher offer gets the mortgage and ask whatever questions are necessary.

There is one such apartment I looked at - 123 West 74th street. The buliding requests 50% down and the agent told me they had an all cash offer above ask. I wonder if it is the same apartment. I did not bother visiting the place. I wonder if the story was true though as our discussion was 4 weeks ago and the apartment is not in contract yet. If that is the same place, I hope you get it. The building seems really nice.

make it no mortgage contingency and offer to pay for the monthlies after a certain date, that will show that you are both financially strong and willing to close quickly

Why would any buyer that requires financing not have a mortgage contingency... sounds like a stupid move.

Angray, if you have more than sufficient earnings to guarantee a mortgage and can afford 50% down + any shortfall resulting from a low appraisal, I'm not sure where the risk of non-contingency is. Call me greedy, but if I were the seller, $15k over ask + non-contingent trumps all cash at ask unless I have a very compelling reason to close quickly.

Seriously, the whole notion of abandoning mortgage contingencies is ridiculous. Brokers will gladly ask it of you because they are the salespeople. But the potential damage to the buyer is so severe --loss of some or all (likely some) of your down payment-- that it a terrible business decision.

I was in your exact shoes when buying my condo a few years ago. Cash offer was actually accepted and contract just went out as we put in our offer, though our offer was 5% higher, which was material enough especially since the seller was taking a loss from their 2007 purchase. We finance 65%, so not quite as good as your 50%, but also provided our REBNY forms and pre-approval to the broker for added comfort. They asked us to waive the mortgage contingency but settled on shortening it to 20 days instead of 30. Deal was made and they pulled the contract from the all-cash offer.

As Ali notes above, if this is a $1mm apartment, guessing that most sellers would likely go with the all-cash offer. If it's $500k, then the percentage of the sale is much more material.

Good luck!

I agree 100% that no mortgage contingency is a very bad idea. At the worst, offer 10k to 20k cash penalty in case mortgage is denied or offer to cover their monthlies in case of delays. But risking 10-20% down payment is a terrible idea.

I would take the buyer with the cash offer unless the other buyer can provide me with a proposal with higher price and excludes any contingencies that can break the deal.

To compete with the cash offer, I suggest the following:
1. Present a higher offer than the all cash offer (if you know what their offer is);
2. Put high % down - 50% is a good % down;
3. Exclude any contingencies.(financing, inspection, CoO etc...)

There are risks in doing the above; however, it is the only way to compete with all cash offers in this active market. I don't think it is a bad idea doing that if you really want the unit and have plan B if the bank turns downs your mortgage application for some reason. Good luck.

See how it all plays out. I had a friend who was in this situation and ended up getting the apartment after the all-cash buyer became difficult during due diligence. All cash buyers can be an interesting bunch. Sometimes they assume money can buy everything, including changes to the co-op's policies.

Having bought and sold real estate a few times in a few different cities, the best deal is usually the cleanest deal. Make your offer as clean as you can but do protect yourselves. A shorter mortgage contingency is a good idea.

Thanks for the comments guys! As expected, I lost out to the cash offer. The apt was 550K, I bid 565K with 50% financed. But not only that, but they also bid higher once they had seen my offer (which I assume the seller used to push the cash offer up).

But they said mine was the first backup if the cash offer doesn't work out. How rare is that situation? What could be the possible reasons an all cash offer doesn't work out?

tell them you are rescinding your offer. first backup my ass. give them one more chance to accept your offer.

It's too bad you lost out. Until the contract is signed, either side can back out at no loss. Buyer could have a change of heart, their own situation change (job loss, sale of own apartment falls through). If the buyer is difficult to negotiate with or too demanding (e.g., demands furniture as part of sale), seller could easily decide not to go through with them. All-cash buyers may feel entitled to more than a financed buyer.

Since we talking about all cash bids, there is record all cash buying in US. Is it true that real estate transactions are exempt from anti money laundering provisions?

http://www.zerohedge.com/news/2013-09-10/money-laundering-exposed-key-component-housing-bubbles-all-cash-bid

Higher offer should prevail if the incremental certainty of an all-cash offer is effectively irrelevant. Of course knowing a bit more about the seller and the listing would help - what neighborhood is this in, what are the demographics of the seller, how long has it been on the market / any price changes, and how directly competitive are other listings out there?

@fieldchester: Its in brooklyn/park slope. I personally like the block very much - 1 block away from all the cool stuff. It 'just' came on the market, and the offers were there after the first open house. No idea about the seller - http://streeteasy.com/nyc/sale/994152-condo-302-2nd-street-park-slope-brooklyn

Oh, and to answer your question about "why doesn't an all-cash offer work out"? Typically, they do. When they don't it's:

a) buyer said "all-cash" in order to win the auction, but then says that what he/she meant was "I'll waive the mortgage contingency, but I still intend to get a mortgage." This pushes the sale back 45-60 days, and sometimes makes sellers feel lied to. I've had sellers break deals over feeling that they could no longer trust the buyer.

b) buyer has successfully bid on multiple units, and despite winning this auction, chooses to move forward on a different property.

c) buyer is skittish, and pulls away from the deal if there's a cross-breeze ("oh, the markets just had a bad day, so I've reconsidered, and I don't think this is the right time to be buying")

d) buyer's atty reviews the contract/offering plan and kills the deal. This may be due to a flaw in the apartment/building that your atty can live with.

Good luck -- I hope you find something -- remember there's always another one.

ali r.
DG Neary Realty

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