Have your cake and eat it too: using hard money vs cash on real estate offers.
Is it better to make an offer on a property with hard money or cash? Which saves money in the long run? Is it the same in the eyes of the seller?
We’ve been doing real estate investment funding for 20+ years and seen tens of thousands of transactions. Here’s what we’ve found to be true: The majority of clients that get deals make a cash offer first, then let their hard money lender take it from there.
Let’s go through the steps to do this legally and on time to help you get the deals you want.
Hard Money vs Cash
What is the difference between a cash offer and a hard money offer?
A cash offer is your money. You bring the money in, and you have no requirements from the seller.
With a hard money offer, you’re borrowing money. You bring in a third party, a lender, and they will have requirements like underwriting, appraisals, credit, etc.
The Seller’s Perspective on Hard Money vs Cash
The seller and their realtor want the least amount of complications possible. Using a loan and bringing in a lender adds complications.
A cash offer, on the other hand, reduces friction. The seller’s side knows they won’t have to worry about:
- Is the buyer approved for a loan?
- Do we have to wait for an appraisal?
- Will there be anything that will slow down this process?
A real estate seller will almost always prefer cash over any kind of loan – even a hard money loan.
Cash Is King…
From the seller perspective, cash offers are undoubtedly the best. From an investor’s perspective, however, it’s almost always better to buy properties with leverage.
But because cash means fewer complications and a faster close, sellers will often give a better price for cash offers.
And in real estate investing, it’s important to get the lowest possible price. So, you should always use cash on a contract offer when possible. It allows you to purchase a property quickly, at the price you want, with no extra costs.
How does this work?
When you put in the offer, check the box that shows it’s a cash offer. The seller will likely accept it (at the lower price you want). Checking the “loan” box on this form automatically makes you slightly less likely to get the property.
…But Leverage Is Power
Once it’s accepted, you can hand the contract over to a hard money lender, like Hard Money Mike. We will reach out to the title company and let them know it has changed from a cash transaction to a hard money loan. The transaction is approved, ready to close, and can be changed by a hard money lender fully legally.
At the closing table, the title company lets the seller know there is an amendment to the contract.
But once the deal gets to the closing table, you’re done. You’re closing the property and the deal at the price you wanted.
A “cash offer” will give you an advantage in the market, but a hard money lender can help you with the actual funds.
Hard Money Lender Help with Cash Offers
There is a big difference between hard money vs cash. When you put in your offer, check the cash box. But you can legally have a hard money lender change it into a loan and get it closed with the best price in time.
We always want to get you the best deal. Now is a great time to invest. If you find a great property, make a cash offer, give us a call, and we can convert it to a hard money loan.