Does the term “cash offer” really mean the buyer has the cash? Not necessarily. Given the multitude of misconceptions about cash offers, this month’s hotline article provides clarity about offers to purchase property without a Financing Commitment Contingency. 

The buyer wants to write an offer with no Financing Commitment Contingency. How can the offer be drafted? What should the buyer consider when drafting an offer in this scenario?  

Although it may sound like a flippant question, the licensee should ask the buyer if the buyer has the funds available to cover the full purchase price to purchase the property. If yes, fantastic. As the follow-up question, ask the buyer if they are able to provide written proof of funds as described in the offer within seven days. If yes, fantastic. The offer may be drafted with no Financing Commitment Contingency, and no additions need to be made to the If This Offer Is Not Subject to Financing Commitment provision of the offer. If accepted, the buyer will timely provide the described proof of funds. 

When the answer to the first question is “no,” follow up to determine how the buyer will obtain the funds for closing. An offer may be drafted with an appropriate contingency to obtain such funds. If the answer to the second question is “no,” and the buyer cannot provide the proof of funds as described in the offer, the follow-up question is: what can the buyer provide the seller to give assurance the buyer will be able to consummate the transaction? Then the offer may be drafted with no Financing Commitment Contingency, and the evidence the buyer can provide can be written in the blank lines in the If This Offer Is Not Subject to Financing Commitment provision at lines 300-301 of the WB-11 Residential Offer to Purchase.  

The individual buyer wrote an offer without a Financing Commitment Contingency. He would like to provide a letter from his place of employment that shows the company has the assets to purchase the property or will lend the funds to the buyer. Would such a letter suffice as proof of funds?

No, not unless the buyer described such a letter in the blank lines at 300-301 of the If This Offer Is Not Contingent on Financing Commitment provision found in the WB-11. As described, the proof of funds would fail the preprinted standard for multiple reasons:

• The letter is not from a financial institution.
• The funds are the company’s funds — not the buyer’s funds.
• The reference is to a potential loan.
• The funds are not available to the buyer at the time of verification.

Upon drafting the offer, this buyer had different choices. The buyer could have included on the blank lines in item (2) of the If This Offer Is Not Contingent on Financing Commitment provision identifying documentation the buyer can provide. At the time of presentation, the seller could agree to such proof of funds, or the seller could counter the offer. 

As another alternative, if the offer has been accepted and nothing was originally written on the blank lines in item (2), and the buyer cannot provide proof of funds as required by item (1), is for the buyer to attempt to amend the offer. The amendment would allow the buyer four different possibilities in this scenario:

• Provide for a different form of proof of funds.
• Include a Financing Commitment Contingency.
• Strike out the proof of funds requirement.
• Prior to the deadline, assign the offer to a buyer who can provide proof of funds. 

If the buyer does not timely provide acceptable written verification or documentation and the parties cannot agree to amend, the seller may terminate the offer. The seller terminates the offer by delivering written notice to the buyer after the deadline in the If This Offer Is Not Contingent on Financing Commitment provision.  

A seller accepted a cash offer, and the buyer was supposed to deliver proof of funds within 14 days of acceptance, but the buyer has not done so. The seller delivered a cancellation agreement and mutual release (CAMR), but the buyer has not signed it. The seller is concerned that if the buyer now shows up with proof of funds even though the deadline passed, the seller would be obligated to go forward. Can the seller really terminate the offer? If so, how can the seller terminate this offer? 

When the proof of funds is late, the seller has a choice to terminate the transaction by delivering written notice of termination, or the seller may allow the buyer more time to deliver the proof of funds. Per the terms of the If This Offer Is Not Contingent on Financing Commitment provision in the WB-11, when a buyer does not deliver proof of funds by the deadline stated in the offer, the seller can deliver a written notice to the buyer terminating the offer. The notice of termination must be delivered before the seller has actual receipt of the buyer’s proof of funds. The written notice may be accompanied by a CAMR. If the seller attempts a CAMR, the CAMR is not a notice of termination. If the CAMR is not signed by the buyer, the buyer can deliver the proof of funds. Once the seller has actual receipt, the seller may no longer terminate the offer based on the If This Offer Is Not Contingent on Financing Commitment provision. 

The buyer plans to obtain financing from a third-party investor and would like to move forward with a cash offer. As proof of funds, the buyer would like to submit a copy of an agreement between the buyer and the investor whereby the investor agrees to provide the funds — in essence, a preapproval letter. Would such a document be acceptable as proof of funds in this scenario?

Unless the buyer describes this type of agreement/pre-approval letter at lines 300-301 of the WB-11, this letter would not meet the elements of a proper proof of funds. To meet the elements of a proper proof of funds, the third-party documentation must demonstrate that the third party is in control of the buyer’s funds at the time of verification — not that the third party may loan the buyer the funds in the future. 

The buyer has an accepted offer with a Financing Commitment Contingency, but the buyer would like to change from financing to a cash offer. Can the buyer unilaterally waive this contingency?

No. Per the Financing Commitment Contingency, the buyer has agreed to provide the seller with a copy of a loan commitment satisfactory to the buyer. The delivery thereof satisfies the contingency. The buyer may later elect to purchase the property with cash and not obtain financing or the financing described in the loan commitment. But a buyer who fails to timely deliver a loan commitment risks the seller issuing a written notice to terminate the offer to purchase. The seller might alternately choose to go to closing without receipt of a loan commitment. 

If the buyer does not want to provide a loan commitment and does not want to risk termination, the buyer may alternately attempt to amend the offer. The parties, for example, may agree to waive the financing commitment contingency. The seller may condition such a change upon proof of funds satisfactory to the seller or any other terms acceptable to the seller. 

The seller accepted an offer with no Financing Commitment Contingency and no Appraisal Contingency. The buyer is attempting to schedule a time for the appraiser to access the listed property, but the seller is refusing. The seller stated they had no idea the buyer was attempting to finance the home, and the seller does not want to allow access for the appraiser. What would be the most appropriate next steps in this situation?

The seller may be referred to the terms of the WB-11 at lines 304-305, which state, “Seller agrees to allow Buyer’s appraiser access to the Property for purposes of an appraisal.” In addition, the seller may review lines 303-304, which state, “Buyer may or may not obtain mortgage financing but does not need the protection of a financing commitment contingency.” 

If the seller refuses to allow an appraiser to access the property, the parties may be referred to legal counsel regarding possible default. The parties may also be directed to the default provisions of the offer at lines 487-501. Alternately, to continue the transaction moving forward, the buyer or buyer’s lender may ask if the appraiser will conduct a “desk appraisal” or “drive-by appraisal” if that type of appraisal would be acceptable to the buyer’s lender.  

WB-11 Residential Offer to Purchase 

Lines 296-307

IF THIS OFFER IS NOT CONTINGENT ON FINANCING COMMITMENT Within ________ days (“7” if left blank) after acceptance, Buyer shall deliver to Seller either: 
(1) reasonable written verification from a financial institution or third party in control of Buyer’s funds that Buyer has, at the time of verification, sufficient funds to close; or
(2) ______________________________________________________________ [Specify documentation Buyer agrees to deliver to Seller]. 

If such written verification or documentation is not delivered, Seller has the right to terminate this Offer by delivering written notice to Buyer prior to Seller’s Actual Receipt of a copy of Buyer’s written verification. Buyer may or may not obtain mortgage financing but does not need the protection of a financing commitment contingency. Seller agrees to allow Buyer’s appraiser access to the Property for purposes of an appraisal. Buyer understands and agrees that this Offer is not subject to the appraisal meeting any particular value, unless this Offer is subject to an appraisal contingency, nor does the right of access for an appraisal constitute a financing commitment contingency.