Arizona real estate law question...mui importante!?

Question

My friend wants to make a 100% cash, no-finance offer on a house in Tucson, and he was told by his agent that he could not submit a bid without a pre-approval letter for a loan. Is this right? Is this legal? Thanks for any help...

Answer 1

Well they need to see that he has the funds available...so if it's a cash deal then he needs to show that he has the funds. Also they may require him to show where he got the funds from it's not like too many people have cash laying around to purchase a house. So all in all, it's probably that they don't want to go through the paperwork involved in that kind of cash transaction there are forms that need to be filled out and sent to the IRS and all that it's a pain so they are just being lazy...if he needs to I can get him an approval in AZ.

Answer 2

Real estate agents in arizona are required to submit any written bid to the seller, unless the seller has instructed their real estate agent that they would not consider bidders without pre-approvals.

That said, you must understand that many real estate investor wannabes who have been to some flakey seminar are taught to bid 100% cash offers to tie the property up. The problem is these pie-in-the-sky folks rarely have the real connections or sophistication to do such a transaction. this is especially true in today's marketplace, where reports of buyers markets have clueless people trying to take advantage of sellers plights. For the seller, it is dangerous. If they commit on a contract to an idiot, they have taken valuable marketing time away from selling their property while they wasted gtheir time.

And every time a seminar is hyped and hits town the real estate agencies are awash with a flood of people, who have just enough knowledge to be dangerous, making oddball offers on every property in sight.

So while legally they aren't supposed to do this, two things may be happening here,

1) The real estate agent is a newbie and is following a checklist of requirements without being experienced enough to adapt to different or unusual situations, or more likely

2) There is a question in someone's mind that your friend may not have the ability to pay cash, and before the seller has their time wasted, they are calling your friend's bluff to see if he has the resources to do what he claims he can do.

My suggestion is this:

If your friend can buy for cash, show proof of funds - a bank or investment statement or letter of credit to show the money is available.

If your friend is just trying to do some slicky "I learned it in a seminar or pie-in-the-sky real estate book" then there is no market here. Go look for another property to try it on.

And yes, before you think me a doomsayer, I have bought homes for no down payment, bought foreclosure homes and flipped homes so I have experience in what works and when.

Answer 3

He may need to provide proof of available funds but cannot be compelled to apply for a loan that he does not need. It sounds like the agent is a neophyte. He should ask for a more experienced agent -- and provide a copy of his bank statement for verification.

The agent is required by law to present all bids, loan qualification or proof of funds are not strictly required. However as a seller my first question when presented with ANY offer is, "Is this guy qualified for a loan or do you have proof of funds?" If the answer is "No," then I ask the buyer to resubmit with proof of loan qualification or proof of funds. I was selling a place in TX last year and had several "all cash" offers that I sent back for proof of funds. They never resubmitted the offers. That should tell you something.