Every seller’s reason for selling their home is uniquely different. Many homeowners want to sell their homes quickly. They do not often want to spend time or effort preparing to sell, which includes completing repairs, handling upgrades and staging and cleaning the house to show it to buyers. These are the types of situations where a seller will reap the benefits of accepting a cash offer on a house, and it is usually the best possible option.
Selling a home requires a lot of work and a stressful ordeal, from the time and effort put in to prepare your house, to the endless amount of cleaning, repairs, and upgrades. The seller might be worried the sale will take too long, that they will not be able to find a quality real estate agent or the costs will be high if they try to sell their home the traditional way.
If you are still wary of accepting a cash offer and only feel comfortable with traditional sales, continue reading through this article, and we will explore exactly what a cash offer is, as well as the main benefits of accepting a cash offer on a house.
What Is a Cash Offer on a House?
As the name indicates, a cash offer on your home means the buyer offers you the amount of money you have listed your home for in cash rather than using financing methods. Having a buyer with enough money to purchase your home outright allows you to avoid several time-consuming and expensive steps that can leave your home on the market longer than you want.
From the owner’s perspective, you might think that this does not make a difference — whether from a bank or from a cash offer, you get your money, right? Well, sort of. If you are working on a tight timeframe, working with buyers getting funding through banks will not be very flexible, even if they want to be. The reality is, cash offers come with non-traditional buyers who are ready to make quick offers, pay cash for a house and avoid all the extra steps that come with a conventional home sale.
How Common Are Cash Offers?
Many believe cash offers on homes are not all that common, but this could not be further from the truth. In reality, cash home sales occur in 22% to 24% of the market for condo and single-family home sales.
Some scenarios make these cash sales more common, including:
- A buyer has just sold their home and needs a place to live immediately.
- Real estate investors want to invest in the property.
- A buyer wants a competitive edge in the market.
- A property needs expensive repairs or renovations.
- Someone wants to sell their home for a fix and flip.
Types of Homes Most Likely to Be “Cash Only”
While everyone’s scenario is unique, some situations just make sense for a cash-only sale. Some of the most common situations that might be best for cash sales include:
Homes Close to Foreclosure
Homeowners at risk of facing foreclosure will find themselves trying to solve their problems. Due to financial circumstances, this means the homeowner can no longer afford to make the mortgage or loan payments on their homes and will feel as though they are running out of options to regain some form of stability.
While there are other options they can take, such as evictions, short sales or bankruptcy, these can have a detrimental impact on the owner’s credit score, making it hard for them to seek loans in years to come. A simple cash sale provides an easy way out without harming their credit score. Accepting a cash offer on a property at risk of foreclosure allows the homeowner to avoid eviction, avoid a lowered credit score, and will enable them to move on to the next stage of their life.
Lengthy Repairs
Traditional sales can make it difficult to sell houses that need major repairs, for example, houses with infestations such as mold. Cash buyers do not have to face these issues and can sell their houses as-is or, more commonly known as fixer-uppers, to people willing to pay upfront. This means sellers don’t have to stress finding the cash to fix repairs and enjoy a speedy closing.
The amount of money a homeowner spends to keep their home to a good standard or well-maintained can sometimes prove to be a lot to handle for some homeowners. Whether your roof needs replacing or your foundation is cracking, repairing your home can cost you tens of thousands of dollars.
Changes to Life
Suppose homeowners experience key changes to their life, such as a divorce, death in the family retirement, relocation for a new job or personal illness. In that case, they may find themselves wanting to buy a new house or change the area they live in quickly. Such changes may require you to sell your house immediately without any extra stress, just a simple solution to a problem that can be solved quickly.
Types of Cash Home Buyers
There are several types of buyers who pay in cash. Unfortunately, not all of them are honest, so it is vital to know to whom you are selling your house. Several cash home buyers come verified, and they will appraise your house honestly before giving you an offer.
Some cash offers come from house flippers, who intend to purchase your house as-is and sell it for a higher value later on. Some cash offers come from individuals who would rather not get financed by a bank often pull from their savings to make a cash offer on a house.
There are many benefits to this system for both the buyer and the seller, including increased control over the home’s offer and sale price. The home seller might not get market value for their home in this case.
Incentives for Buyers to Pay Cash
It is not hard to see the benefits of accepting a cash offer on a house. It is also not difficult to understand why a home seller might prefer a cash deal: It’s quicker, easier, and with fewer obstacles to maneuver.
The buyer who can pay cash is someone who can present the best possible profile to the seller. This is someone who is likely to be financially stable with a good credit rating. It is also someone who understands the home buying process from start to finish. They have done their research, learned about real estate prices, and come to a reasonable conclusion about what they would like to pay.
If you can afford to buy up front, the advantages are many:
- Sellers are likely to favor buyers who can pay in cash.
- The home price may be reduced for those who pay in full up front.
- All-cash purchases streamline the home-buying process: No loans means less paperwork and no delays for mortgage approval.
- Cash buyers can save money on closing costs, bank appraisals, mortgage applications and fees, title insurance, and so on.
- Cash purchases eliminate the risk of loan denial.
- Cash buyers pay much less for their homes in the long run: No loans means no interest.
- Cash buyers never have to worry about losing their homes because they can’t afford to repay their mortgage loans.
- Cash buyers gain full, immediate equity in their home.
The Benefits of Accepting a Cash Offer
A cash home sale can be a very different experience from a traditional home sale in several ways.
Here is a breakdown of some of the most significant differences.
1) Quick Closing
From start to finish, a cash offer takes less time to finalize. Without a mortgage lender involved, the whole process becomes much faster. There is no underwriting process, for one thing—that process can take a month or two alone. Selling a home through a traditional mortgage lender is time-consuming, taking an average of 47 days to close because lenders require a lengthy underwriting process at the end of the sales process. With an all-cash offer, the average time to close is approximately 2 weeks.
Between the initial pre-approval and the loan finalization, if a buyer’s financial picture changes or they fail to satisfy certain requirements, the lender can decide to decline their loan, resulting in your deal falling through and leaving you back at square one of the selling process.
2) Less Paperwork
The endless paperwork required with selling a house can be confusing and hard to understand. Reading, initialing and signing all that paperwork can be overwhelming, and ensuring you understand everything detailed in the paperwork entirely is essential and a small mistake can create huge problems. A cash buyer who is reputable and can prove they have the funds will sort out paperwork and closing information for you. You should always check reputable cash buyer’s reviews or references, as well as proof of funds, before you move forward with a cash sale.
3) Less Risk
As a seller, you might be fielding several offers. Unfortunately, offers from those working through the financing process may not pan out, leaving you with a property longer than you intended and costing you money.
A cash offer, on the other hand, is guaranteed money on the spot. It might be a lower offer, but there is little chance of complications due to an outside party, meaning you can complete your sale more quickly and with less expense.
4) No Appraisal Necessary
Traditional home sales involving mortgage lenders means someone will have to conduct an official appraisal of your property and decide its value. If your home doesn’t appraise at the list price or higher, the lender can refuse to approve the buyer’s mortgage loan. Or, the lender may agree to finance the home, but the buyer would be responsible for fronting the difference. Oftentimes, buyers do not have the financial means or are unwilling to cover the difference. If that’s the case, the buyer can rescind their offer.
A cash sale removes the appraisal from the process. No mortgage lender means no appraisal requirement.
5) Selling “As Is”
A home inspection may bring up the need for various—sometimes expensive—repairs.
Cash sales, however, tend to be “as is,” meaning the buyer has agreed to purchase the home without you having to make any repairs or changes. You also get to skip the cleaning and staging steps as well. If you want to move on making the sale quickly, selling “as is” is ideal.
Inspection contingencies can often put buyers and sellers at an impasse:
- If a buyer does not want to invest any further money into the property before selling, a potential buyer could back out of a sale if their lender refuses to approve a loan for the property.
- If a buyer does not agree with a seller’s reduced price to account for the buyer’s future investment in repairs, the seller could reject the offer and move on to the next one.
6) More Confidence in Closing
Working with a home buyer requires numerous stages—pre-approval, inspections, surveys, appraisals, and insurance verification. All of these steps present opportunities for a sale to fall through since a mortgage lender could take issue with any of the respective reports and refuse to approve a buyer’s loan.
Entertaining a cash offer gives you more confidence that the sale will close. Cash buyers either have the money to invest in your property or they don’t, and while they can certainly purchase inspections, appraisals, and other due diligence efforts if they wish, buyers are more likely to spend their money on the commodity in which they’re investing—a new home.
Find the Right Agent
Buying your house should be a fun and fulfilling experience. If you have done your research and evaluated what you can afford and what you truly need, finding a new home can be exciting. Learning more about the purchase process eliminates the fear of the unknown and lets you search for a home with peace of mind.
Windermere’s community of real estate professionals is our greatest asset. We have experts in all areas of real estate, from your typical starter home to condos, luxury properties, and new construction. While residential real estate is the mainstay of our business, Windermere also has offices and associates who specialize in property management, commercial real estate, and relocation services. To further facilitate the home buying process, Windermere has affiliated partners in certain regions to provide mortgage, title, and escrow services.
Call us today with any questions or concerns. Our professional Real Estate Agents will help you through this exciting process. (951) 369-8002