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If I am paying cash for a foreclosure, does it give me "bargaining power"?

  • October 03 2012 - US
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Answers (9)

No Advantages or bargaining power is given by paying cash since a foreclosure seller will always get CASH from any buyer. If you pay cash, other buyer's using loans for this purpose will also pay cash at the end, the only difference is that probably your cash belongs to yourself, and the other guy's cash belongs to his lender, but at the end is the same. If someone is selling a foreclosure and will accept credit ( not cash ) there might be something fishy about it...
  • October 05 2012
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Profile picture for Unicornz0

No,

Not so much as one might think.
The Bank will likely counter your offer with an Addendum dictating the terms of their acceptance, requiring you to use their title company & closing agent, etc.
You will likely have to agree to their terms.

  • October 05 2012
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Ranking order

1. cash - no contingencies

2. cash - minimal contingency

3. conventional loan - no contingency

4. conventional loan - minimal contingency

5. FHA

6. FHA 203k (reverse with #5 if property not in good condition)

7. Mastercard/Visa

8. Food Stamps

However, if an FHA offers $220k and your cash is $200k, you'll probably lose, cause it will take the bank an extra 2-3 weeks to close but that doesn't excuse a $20k loss.
  • October 04 2012
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Profile picture for blue screen exile
Don't forget, if you buy a foreclosure, the bank is not required to disclose anything they don't know.  If the home was used as a Meth lab, it is likely contaminated beyond remediation.  A typical home inspector will not find these issues.  If you buy and find out, you will not be able to sell it as you would need to disclose the condition, and remediation is more expensive that the homes are worth, and if the ground was contaminated, even complete remediation will not fully address the contamination issue.

There was a NPR radio program on this issue this past week.

By the way, some banks would rather you have the loan with them than for you to give them cash.  It primarily depends on how they account for the loss in their books.

If you are actually buying a "foreclosure" at the public auctions, all buyers are required to bring sufficient cash.  But then one is really taking a risk if they haven't done their homework and don't know what they are buying.  Most of us are assuming you were referring to "REO" (Real Estate Owned) where the lender bought the property back at the auction due to insufficient bids to cover the expected value to minimize their loses.

  • October 03 2012
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Profile picture for Ofe Polack
Oftentimes contingencies are more important than cash.  Cash allows you close faster, if that is what the lender is looking for though.  No contingencies-cash is the best possible scenario for a seller.
  • October 03 2012
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Cash allows you to close more quickly. And if you're offering cash, expect that the bank will want a quick closing.

If you opt for cash, make sure you can provide a 'proof of funds' to the bank as part of your offer. A proof of funds is either a copy of a recent bank statement (with account # inked out) or a letter from your lender to show you have the money in the bank to close the deal.
  • October 03 2012
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Profile picture for sunnyview
Cash with few other contingencies is often a stronger offer overall, but you can't expect a deep deep discount from the bank even with cash. They still want to get as close to their asset manager's valuation as possible.
  • October 03 2012
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Thanks for posting your question on Zillow.com!

I have had more multiple offer situations won when buying with cash.  It depends on if your offer is ridiculously low.  If you have the option, go cash.

Good luck! :-)
  • October 03 2012
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Cash does not give you bargaining power per se on a foreclosure. The lender has a net which they want, cash can close quicker than another offer that requires a loan. There are other aspects of the offer that make a lender accept one offer over the other such as waiver of inspections. I hope that was helpful!
  • October 03 2012
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