All Cash…Full Prize

Many of us hear the words “all cash, full price” and shake our heads. Even then, however, there are many ways to make transactions on non-investment grade properties where the owner insists on “all cash, full price.” We have to look to the other things the Seller can do in the transaction. We have to look at the “CAN-ADDS.”

Some years ago, I had an older four-plex in a marginal neighborhood close. The four-plex had a $43,500 appraisal on it, but there was no market even at the appraised value. The economy was slow and there were few buyers. New 2nd mortgage financing had dried up. The property was part of a package of properties covered by a blanket 2nd mortgage to a local credit union for a loan of $45,000. That was on top of a $13,500 first mortgage on the four-plex itself. Consequently, I was looking for that most precious of creatures – an all cash buyer.

When the lender told me they had to rearrange the loan to meet Federal requirements, I knew I had an opportunity. I found a partnership of three individuals who also needed cash. I sold the four-plex to them for $43,500 ALL CASH. For the purchase price, I arranged for each of the three partners to borrow $15,000 from the credit union using other properties they already owned as individuals. That gave them $45,000. I took all the cash plus $1,500 from my savings and paid off the credit union. I freed up all the rest of the properties previously covered by the blanket mortgage. With one of those properties that were freed up, I borrowed $13,500 to pay off the first mortgage on the four-plex.

The result for the credit union was they invested no new money, but had three individuals on loans rather than one. That met their Federal requirements. I sold a property for “all cash, full price” in a market with no cash buyers.

What did the buyers get? They leveraged their existing equities to buy a new property AND now owned it free and clear. They went to their own bank, borrowed $30,000 on the four-plex based upon an updated appraisal. They had just bought a property and put cash in their pocket at closing.


THE BOTTOM LINE: Even when the Seller requires “all cash, full price,” it’s the “CAN-ADDS” that can make the deal work!

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