There is a common misconception in the real estate world that cash offers are superior to finance deals. As such, cash buyers are perceived as the holy grail of residential real estate transactions. Yet cash buyers are nothing more than buyers offering sellers yet another option.
It should be noted that in a hot real estate market similar to what we are experiencing now, cash speaks loudly. According to recent data, nearly one-quarter of those who purchased homes this past March (2021) did so with cash. Cash offers are so prevalent these days that experts say sellers should expect to get at least one.
CityHome Collective, a Salt Lake City, UT real estate brokerage and interior design company, says sellers should not be quick to jump on cash offers. Rather, they should consider all the details because there can be devils in those details.
Selling Without Contingencies
One reasons for accepting a cash offer is the opportunity to sell without contingencies. The typical cash offer is pretty straightforward. A buyer offers to pay so much for your house as-is. Few questions are asked unless the property demonstrates significant deficiencies.
Assuming your house is in good shape, selling without contingencies probably seems attractive. But look at the details. Does the offer give you time to buy a new home and arrange financing? Does the price reflect the reality of your current market? This second point is well worth considering given the fact that cash buyers are known to offer less than the asking price.
Knowing the Buyer
In the current market, most cash offers are made by four types of buyers:
- Landlords looking to add to their portfolios
- House flippers looking to buy cheap and sell high
- Wealthy individuals we do not need mortgages
- Out-of-state buyers with proceeds from a previous sale.
As a seller, ask yourself whether or not you care who buys your home. Do you want to sell to a landlord or investor whose only motive is profit? Or would you rather sell to a middle-class family, similar to your own, looking for housing so they can escape the rental game?
Reasons to Accept a Cash Offer
You may decide that it doesn’t matter who buys your home as long as it sells. You might also be willing to take a little less to get a deal done quickly. Fair enough. Here are some additional reasons you might want to accept the cash offer:
- Transaction Speed – Cash deals can generally be completed rather quickly. A buyer might be able to close within weeks, where another deal requiring traditional financing could take from 30 to 60 days.
- Transaction Certainty – Assuming you verify the funds offered by a cash buyer, you can be reasonably confident that the deal will close. Only a small percentage of cash buyer contracts end up being terminated.
- Transaction Simplicity – Closing on an all-cash deal tends to be quite simple. Buyers take the initiative to deal with title and escrow issues. They tend to have experienced agents who know how to get paperwork done. And in the end, there is a lot less paperwork to sign when no lenders are involved.
A cash offer could be what you have been hoping for since you put your house on the market. But be cautious. Cash buyers are not the real estate holy grail they are made out to be. It is all in the details. If a solid contract offers you what you want while protecting your interests, go for it. Otherwise, hold out for something better.