Should You Accept a Cash Offer for Your House?
If you’re a homebuyer, chances are you’ve heard that cash offers are more desirable than financed ones. But do you really know why that is? Obviously, sellers prefer cash offers. But why do sellers prefer them?
In this blog, we’ll look at the advantages of taking cash offers for sellers and why prioritizing higher cash offers while making a selection on which offer to accept makes sense.
What is a cash offer?
A cash offer is simply an investor offering to buy your house for cash. No, it’s not as intense or daunting as somebody coming into your home with a briefcase of money and making you an offer (that usually you can’t refuse).
A cash offer is one in which the buyer offers to pay for the entire cost of the property without using a mortgage. Cash sales accounted for up to 24% of single-family and condo purchases in the United States during the last two years, according to some reports.
As a seller, receiving a cash offer isn’t a pipe dream. We wouldn’t call it typical, but it’s not uncommon, especially considering how hot most housing markets are right now and how many people are selling their houses for a profit.
Who makes cash offers?
Because cash offers demand a lot of money readily available, real estate investors are the most probable people to make these types of offers.
More often than not, cash buyers are those at the higher or lower ends of the housing market. For example, investors and house flippers usually buy houses that need some work done to them in order to avoid monthly payments while they’re fixing it up. On the other hand, very rich people (or those who have made a lot of money from selling a home or inherited wealth) tend to prefer buying houses with cash so that they don’t have deal with banks.
With that being said, more home buyers are resorting to paying with cash. With housing inventory low and buyer demand remaining at a constant high, buyers can use cash offers as an advantage in bidding wars. If not a full cash offer, then they should put down more money upfront to reduce the amount of their mortgage loan.
Although cash offers from investors and regular buyers may look the same at first, there are some key differences. For example, since investors likely don’t plan to live in the home they’re buying, they may waive contingencies to make the deal as fast as possible. On the other hand, a regular home buyer who will be living in the house is less likely to offer such waivers and may even insist that a seller upgrade certain features of their own accord before making a cash offer.
It is important to remember this difference when deciding if a cash offer is right for you.
Benefits of a financed offer over a cash offer
Although this article is focuses on the advantages of selling your property for cash, we can’t leave out a few benefits of financed offers. Sometimes cash offers don’t result in the best outcome, it just depends on the situation.
Consider your timeline
Cash offers are popular since they generally have a faster closing procedure. This is not always in your best interest as a seller, however. You may still need additional time to move your possessions out or look for another house. When you accept a financed offer, the buyer’s lender has its own list of things to check, giving you some more time to figure out what comes next.
You might get more money
A study from the University of California, San Diego found that sellers accepted cash offers that were, on average, 12% lower than financed offers throughout this period. That’s a significant difference! Cash bids favor flexibility and convenience, but they may also have a literal cost.
You’re usually dealing with normal people
Most people want the family who moves into their old home to love it as much as they did. Some cash buyers, however, are only interested in how much money they can make from selling it.
While most people want to get the highest possible sum for their home, you have some choice over who you sell to. For example, buyers using financing are typically regular people who genuinely want to live in your property. On the other hand, cash buyers might be pushy and just looking for a deal while financed buyers could be pickier but this is usually because they view your house as a potential future home.
Keep in mind that this is a situational thing — you might not get along with anyone who makes an offer!
Benefits of a cash offer over a financed offer
Remember, a cash offer doesn’t mean you’ll receive a kiddie pool full of money to play in. Unless you own your home outright, the majority of that money will go to your lender in order to pay off your mortgage. Another portion will be spent on a new house. As a result, the phrase “kiddie pool full of cash” does not indicate that receiving an offer through cash is preferable over taking out an offer with financing.
However, there are several more advantages.
The main advantage of accepting a cash buyer is that it saves time. Even preapproved home buyers still have to acquire an official mortgage approval, go through underwriting, and wait up to 60 days before getting their property closed on. Cash transactions, on the other hand, can complete in as little as two weeks. There are far fewer hurdles to overcome and less time spent at the negotiation table when compared with conventional house sales; this allows you to get rid of your property fast.
Confidence in the deal
The National Association of Realtors reported that 24% of settlements were delayed and 5% of sales were terminated as of October 2021. 21% percent cited appraisal issues for the delays.
If you choose to go with a cash offer, then you don’t have to be as concerned about obstacles such as inspection or appraisal ruining the sale. Lenders want safeguard their investment and will thoroughly examine everything. With a verified cash buyer, there is no financial worry on your part, which gives you greater peace of mind that the deal continue according to plan.
Cash purchasers are also known for waiving contingencies. It’s the lenders that want to ensure a buyer can pay off their mortgage and they’re paying what the property is worth. However, keep in mind that each scenario is different – some cash buyers may retain the contingencies to safeguard their investment.
A home appraisal is also a source of stress for homeowners since it may reveal that their property isn’t worth as much as they believe. An appraisal that doesn’t match the selling price might kill a transaction and force you to cut your asking price. You won’t have to worry about what your house is “really” worth if a cash buyer opts out of this procedure.
When it comes to pressure, selling to a cash buyer might lighten your burden. Selling in the conventional manner implies cleaning, staging, repairing, and upgrading your property. You may have to hire a real estate agent and deal with showings and open houses in order for this process to be completed. It can be time-consuming, costly, and stressful.
Cash buyers usually want to move fast, and if they identify your home as a worthy investment, they won’t ask you to do any of that stressful stuff.
Although cash buyers may bid lower than other types of buyers, by foregoing inspections and accepting the home as is, you could ultimately save money.
With a typical sale, an inspection may bring up issues that need to be fixed. Oftentimes, the home seller must pay out of pocket to fix these problems or lower their asking price. On the other hand, cash buyers don’t tend to care about this because they’ve already factored those costs into their offer.
Furthermore, real estate agents receive a commission that’s close to 6% of your home’s sale price. If you manage to find a cash buyer who doesn’t use an agent, you’ll save on that expense.
Finally, cash sales generally require less paperwork. Many reputable cash buyers will take care of the closing and paperwork for you. Because many cash purchasers waive contingencies, you won’t have to examine any additional papers.
Do your homework and have a consultation with an attorney before signing anything so you know exactly what you’re getting into.
Should you accept a cash offer?
The final choice of whether to accept a cash offer lies with you. Every case is unique, so you’ll have to figure out what matters most to you during the home-selling process and examine each proposal closely.
We at Sell a House Washington understand that some sellers want to receive their payment as quickly as possible without any hassle. If that’s what you’re looking for, then we might be the right buyer for you.
We make sure our sellers are comfortable with the entire process before moving forward. We also answer any questions that they may have so they know exactly what to expect from us.
If you want to learn more about selling your home to us or just want a free, no-obligation consultation, give us a call today.
Click on sell my house today to learn more about how we buy houses quickly for cash in Washington. We buy houses in the following cities: