Hard Money Loan Not the Same As an All Cash Offer


Many real estate agents do not understand how a hard money loan works. Yesterday I watched another agent help a first time real estate investor lose his earnest money on an investment property purchase. I received a call from a new client last week who had a property under contract in Colorado and needed a hard money loan for rehab. After putting in for a price reduction, the bank was pushing him to close in 5 days.

Although he told his agent he would be using a hard money loan on the purchase, the agent did not understand how a hard money loan works https://privatemoneyutah.com/video-what-is-a-hard-money-loan/, and he incorrectly assumed it was the same as cash. This is a common misconception among agents not used to working with real estate investors. They submit an offer as all cash, and assume a hard money loan is the same as cash. A hard money loan is not the same as cash.

Since this offer was submitted as all cash, this first time real estate investor did not know that his agent would need to submit an addendum for lender financing for the hard money loan. When we called the Title company for the Prelim Title Report, they were surprised and told me it was an all cash offer. I called the real estate agent immediately and he said he thought hard money was the same as cash. The agent said he assumed that a hard money loan was not a collateralized loan but rather a personal signature loan.

But by then it was already too late to submit an addendum for hard money financing and the closing deadline was only 2 days away. The first time real estate investor lost his earnest money and the agent just shrugged his shoulders. Although the first time real estate investor is to blame, surely the real estate agent’s ignorance played a major part in the loss of the earnest money. What is your opinion?

2 thoughts on “Hard Money Loan Not the Same As an All Cash Offer

  1. It’s for that reason that I don’t use a purchasing agent. I prefer to write Ll my own offers. Often times the agent doesn’t understand what I’m proposing.

  2. If he wrote on the contract it was an all cash offer then he was an idiot for posting the wrong kind of financing but his errors and omissions insurance should cover it.

    In any transaction using a loan for financing, the mortgage contingency clause would kick in, if no loan was involved then why didn’t anybody, agents, attorneys, seller, anyone ask for proof of funds?

    This story seems a little rough on the facts looking like just another reason for irresponsible “investors” to blame the agent. The buyer should have made it perfectly clear what he was doing, sounds like the buyer may have told the agent it was a cash offer which is usually what it turns out being or they are vague in the facts saying they are “working” with an investor who will supply the cash. Either way there seems to be plenty of blame to go around on that disaster.

    NJ Real Estate Broker / Instructor

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About the author

Corey Curwick Dutton, MBA Park City, Utah - 2005 MBA Graduate with 10 years experience in Business Management including International Management. Corey is a Private Money Lender and Loan Officer. In her spare time Corey enjoys writing on topics in the private money lending industry. She also enjoys hobbies such as mountain biking and skiing in the great outdoors of Utah.