What’s Great about a Cash Offer?
Updated: Mar 27
As a seller, you might not care how the buyer is paying. It’s all the same to you, right?
Actually, it’s not quite that simple! Cash offers have some significant advantages. They could mean the difference between selling your house and a contract falling through, leaving you back on the market.
Let’s look at a few examples of how a cash offer can benefit a seller!
There’s No Financing Contingency
Even the most qualified buyers can have surprises emerge. Although generally rare, issues ranging from losing a job to identity fraud can derail what could have otherwise been a solid sale.
Most issues can be solved during the financing process. Even so, when faced with two identical offers, one cash and one financed, the cash offer will always be the less risky way to go.
There’s No Appraisal Contingency
Even once the buyer and seller have agreed to a price and have gotten through inspections, the appraisal can cause issues.
An appraisal is what the lender uses to determine the value of the property. They lend based on a ratio of the loan (mortgage) to the value of the property. If the appraisal comes in too low, it throws off those ratios and could make it so that a buyer no longer qualifies to purchase a home.
For homes that are in need of repair, appraisals can be particularly problematic. The lender may require certain repairs to be completed before a mortgage is finalized, and these repairs can cause the appraisal to come in lower.
It Can Close Quickly
Standard real estate transactions with financing take 30 days or longer to close. While some lenders can inch that timeline up a bit, it’s usually the good part of a month.
Cash buyers often can close in a matter of days or weeks, as title is the only factor driving the timeline. Once title is cleared, the deal can move quickly. In most cases, the seller can choose to slow down and select the closing date that works for them. Cash buyers provide the ability to move quickly, or slow down as needed.
Who Buys for Cash?
21% of real estate transactions are purchased using cash. The majority of these buyers are investors, with a smaller percent being traditional buyers.
Traditional Buyers: These are buyers who buy the house as a home and generally purchase for market price. Traditional buyers are not the usual cash buyer.
Buy and Hold Investors: These investors purchase a home to rent out. As far as investors go, their business model is not usually dependent on purchasing for substantially below market value.
Flipper Investors: These investors are your HGTV-style buyers who come in, improve a home, and then turn around to sell it quickly. They buy at the biggest discount and do low volume, so they need large returns on each property.
iBuyers: “Instant” buyers work on a large scale: they acquire properties, do simple improvements, and then turn the properties around quickly. iBuyers work on a large scale and are profitable by making smaller returns on a higher volume of properties.
If you’re interested in receiving a cash offer, one great option is working through an iBuyer, such as Keller Offers Powered by Offerpad. Reach out to a Certified Agent to find out more!