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Call it the mortgage merry-go-round: Parents refinance their home to fund the full cost of their son or daughter’s desired home. This allows the child to compete as a desirable all-cash buyer in an area where bidding wars are common. Then, when the purchase closes, the child refinances the new home and pays the parents back.
Sellers often prefer cash because transactions can close quickly without making a deal contingent on financing. This is particularly important in bidding wars: If the purchase price is above the list…