“Cash Offer” — No Loan Contingency

An all-cash offer means the buyer proposes to purchase a property without relying on obtaining a mortgage or other financing (offer has no loan or financing contingency). While it’s called an “all-cash” offer, it doesn’t require physical cash payment; rather, the buyer assures they have sufficient funds available to complete the purchase. This type of offer often includes a clause where the buyer agrees to pay a penalty if they fail to provide the promised funds at closing, ensuring the seller of the buyer’s financial commitment and capability to follow through with the purchase.

Buy cash, then put the mortgage on afterward. The reason to care about this is that a cash offer wins contests a financed offer loses, and you do not have to stay in cash to make one. Fannie’s delayed financing exception lets a borrower who bought a property without mortgage financing take a cash-out refinance at any point in the following six months, with none of the seasoning a cash-out normally requires. The loan is capped at your documented initial investment plus the closing costs of the new loan, and the LTV is measured against the current appraised value, not what you paid. The sequence, then: draw on the SBLOC or margin line (section “Asset Backed Loans (ABL)”), close all cash in two weeks, and refinance out at leisure while the securities stay invested and unsold. You never realize the capital gain, and you never write a financing contingency.

The conditions are exact and worth reading before you commit to the strategy:

The purchase must be arm’s length

Buying from your parents does not qualify. The title search must show no liens, and a settlement statement must confirm no mortgage financing was used.

Buying entity is flexible

You may have taken title as an individual, an eligible inter vivos revocable trust, a land trust, or an LLC or partnership you own 100% of. The trust and LLC allowances matter if you already hold real estate that way (section “Real Estate Investing”).

The borrowed purchase money must be repaid from the proceeds

If you funded the purchase with an unsecured loan or a line secured by something other than the subject property — an SBLOC, a HELOC on your existing house — the settlement statement on the refinance must show the proceeds paying that loan off or down. That is the intended path, not an obstacle, but it does mean you cannot buy with the line and keep the cash.

Gift money cannot be reimbursed

Funds received as a gift and used to buy the property may not be pulled back out with the new loan.

You pay cash-out pricing

The loan-level price adjustments for a cash-out refinance apply, and the one-unit principal-residence cash-out ceiling is 80% LTV. Price that against what the cash offer bought you in negotiation — in a contested sale it is frequently the cheaper side of the trade.