My contract states:

32. Which Buyer agrees to pay in the following manner:

33.        1. Cash of 3.5 percent (%) of the sale price, or more in Buyer's sole discretion, which includes the earnest

34.             money; PLUS

35.        2. Financing of 96.5 percent (%) of the sale, price which will be the total amount secured against this property

36.            to fund this purchase.

On an addendum to the contract I have:

13. FINANCING CONTINGENCY: The purchase Agreement is contingent upon the following and applies to the first

14. mortgage and any subordinate financing.

15.

16.      If Buyer cannot secure the financing in the Purchase Agreement, and this Purchase Agreement does

17.      not close on the closing date specified, this Purchase Agreement is canceled. Buyer and Seller shal immediately

18.      sing a Cancellation of Purchase Agreement confirming said cancellation and directing all earnest money to be

19.      refunded to Buyer.

Is there anything like this in your offer? Once both parties sign the offer, it becomes a binding contract so if there is nothing about the financing and it's all signed, I'm not sure what would happen. If you did have this in the contract, you'd have to sign an amendment to change it to CASH. Maybe this is just their counter offer. As in, they'll accept your offer if you can pay cash for the house. If not, then you can counter-offer, say upping the purchase price if they'll let you get a loan.

Is the house in rough shape? Maybe the seller knows it won't pass an inspection/appraisal. I put an offer on a house and since I'm using FHA they wanted me to use HomePath (HUD House) because the house needed to be painted and they knew it wouldn't pass an FHA inspection.

How badly do you want the house?

What does your agent have to say about this?