Ilyce Glink and Samuel J. Tamkin
Q: I intend to accept a cash offer on the sale of my home. Is the certified bank check really the most secure form of payment other than a bag full of cash?
A: We laughed at the thought of someone walking into a locker with a bag full of money. Maybe they’re paying for their million dollar property in singles?
Seriously, you asked an interesting question, and our answer might surprise you. Let’s start with an explanation of what an “all-in-cash” offer is.
Sellers want to know that when they sign a contract with a buyer, the buyer will complete the purchase of the home. Buyers use the term “cash offer” to indicate that they do not need to borrow money from a lender to complete the purchase. (This doesn’t mean the buyer comes with a bag of cash or even a certified bank check.)
Most borrowers go to a bank, mortgage banker, or mortgage broker, apply for a loan to cover part of the purchase price, then pay the rest (minus the bona fide deposit) owed by wire transfer. banking. Typically, the lender provides most of the funds for the purchase of the home.
But since most buyers rely on financing from a lender, most purchase contracts include a financing contingency. This contingency stipulates that if the buyer does not obtain financing for the purchase of the home by a certain date, the buyer can cancel the transaction and the seller will reimburse them for any money paid by the buyer.
Well, right now we’re in one of the hottest sellers’ markets we’ve seen in over 25 years. There are many more buyers than there are properties for sale. Most homes are sold in auction wars, and buyers do what they can to make their bids stand out in what is often a sea of auctions. Thus, they tell sellers that they will buy in an “all cash” transaction. This means that the buyer is prepared to give up the agreement, including any money deposited for the deposit in good faith, if the agreement is not concluded for some reason, as if it does not can’t get funding.
In some real estate markets, listing agents will ask the buyer to provide proof of funds that they can complete the purchase with the money the buyers have in the bank. These agents are trying to make sure that the buyers will actually close the house and have the money to do so.
But you have to remember that most buyers don’t have that much cash to go without a lender. In the end, what really matters is how much serious money the buyer deposits as proof of good faith. If the buyer makes a cash offer but only deposits $ 1,000 as a deposit, the buyer isn’t risking much – and the seller knows it.
But if the buyer pays $ 25,000 or $ 100,000, the seller knows the buyer is serious and is more likely to close. The strongest offer a buyer can make is a cash offer with a large down payment.
Let’s go back to the mythical bag of cash. Usually, buyers show up at closing with a bank check or have already wired funds to the settlement agent or office. Whether they have a bank check or the money has been transferred in advance, the settlement agent takes these funds and pays them to the seller, the lawyer (if there is one) and any other person who must be paid upon closing.
Aside from buyers who offer cash, fraud is rampant in the world of wire transfers. You need to make sure that the bank transfer information is correct, because once the funds leave your account, they end up in the recipient’s account. And, if you click on the wrong link or send the funds to the wrong place, you could lose all your money.
Do not set up a wire transfer without first verifying the account information with the settlement company. If you receive an email claiming to be from the settlement or title company, call them directly to make sure you get the correct account number. It’s unclear how crooks and bad actors can send phishing emails to buyers who are within days of closing, but it happens more frequently. Beware of any emails you receive claiming to give you wire transfer information for your transaction.
For our reader, do not plan to see this bag of money until closing. Instead, schedule a bank transfer of the funds and be sure to let the professionals on your team guide you appropriately. Ultimately what you want is the title and keys to your new home, not a conversation with the FBI.
Contact Ilyce Glink and Samuel J. Tamkin through their website, ThinkGlink.com.