Best Practices When Accepting A Cash Offer

Dear Phyllis,
After two weeks on the market, we accepted an
offer from a cash buyer. Escrow was scheduled
to close in 15 days. The buyer removed their
inspection contingency and, because there was no
loan to worry about, we were mostly packed and
ready to move. Now we learn that the buyer is
trying to get a loan and is struggling because of
his credit. Our agent now claims that the buyer
doesn’t have enough cash to buy our house. What
are the best practices when accepting a cash
offer? E.S.

Dear E.S.,
You’ve learned that the buyer is trying to get a
loan. Worse, he’s having credit issues. Your agent
now says the buyer doesn’t have enough cash to
complete the purchase. Understandably, you’re
wondering, shouldn’t this have been checked
from the start?

Typically, yes. When a cash offer is made,
verifying the buyer’s funds upfront is standard
practice. That includes reviewing bank
statements, stock portfolios or other proof of
funds. Years ago, I had a similar situation. My
seller received a cash offer. The buyer showed
proof of funds before entering escrow. However,
during escrow, the buyer used that cash to
purchase a different property, leaving him unable
to close on ours.

You and your Realtor should start building a
case to retain the buyer’s earnest money deposit
if he fails to close. Confirm that the buyer has
removed all contingencies in writing.

Ask your agent whether your contract includes
clauses for liquidated damages or arbitration. If
not, you may need an attorney to help pursue
damages. Confirm whether the buyer has
removed the inspection contingency in writing.
Consider offering the buyer an extension. Try to
get him to sign an escrow amendment that, if he
can’t close escrow, will automatically release his
earnest money deposit to you. To show good faith,
you might offer the buyer an additional one week
to close. If he still can’t close, consider extending
escrow by another two weeks, with a $200 per
day fee to cover your mortgage and moving costs.

If it seems unlikely that the buyer will secure
financing, consulting with a real estate attorney
may be wise. They can help prepare a solid case to
keep the deposit and explore your legal options.
Warm regards.

Phyllis