The Arizona contract for resale home purchase requires buyers to declare if they are going to finance the transaction… or if they are going to pay cash.

And then the contract goes further. Buyers using a mortgage are required to show – on an Arizona approved form – that they have prequalified for a loan. Buyers using cash are required to provide proof of funds from a financial institution.

Throughout the first ten days after the contract has been signed, buyers who are getting a mortgage have contractual deadlines related to applying for a mortgage and making progress on providing a lender necessary paperwork. Cash purchasers do not have the same requirements.

Seems straight forward, right? And it is. Unless the buyers change their minds and decide, after the deal has been accepted, that they want to change where the money is coming from. Most often, my experience with changes has been that cash buyers elect to get a mortgage, though I have seen it go the other way as well. Buyers decide to change their financing for any number of reasons – the predominant one being a meeting with a banker or financial planner after the deal is sealed.

Don’t get me wrong, up to a certain point in the life of the transaction a buyer IS allowed to change their financing approach – but the change involves the sellers, the sellers’ agent, the title company, bankers and mortgage professionals. There is paperwork that is done to amend the contract to update the financing. Overall, while it is a change that CAN be made, it is best to avoid having to make it.

Cash transactions and mortgages put the same money in a sellers account on the same day, but the road to getting that money to the account is different. Mortgages involve appraisals, regular updates from lenders and contractual deadlines. Cash deals avoid those constraints and tend to be more straightforward – but even moving from a mortgage deal to cash, which is generally more welcome than moving to a mortgage – will feel like a bump in the road for everyone.

So, buyers are wise to educate themselves before making an offer by talking to their advisors and fully understanding the impact of a loan or a cash purchase on their financial health.