What is a Cash Offer for Your House?

Why Should You Consider It?

A cash offer is an all-cash bid, meaning a buyer wants to purchase the property without a loan or other methods of financing. These offers are sometimes more attractive to sellers, because they mean certainty, no risk of the buyer financing fall-through and, usually, a faster closing time.

How is the process different with a cash offer?

With a cash offer, the buying and selling process is a little different than it would be with a traditional mortgage involved.

For one, the process is generally faster. There is no need for a mortgage application, or underwriting, and the buyer often doesn’t need an appraisal. As a buyer, you’ll still need to figure out the title policy and insurance (which a title company will be able to help with), provide a proof of funds, and sign the closing documents. And because there is not a mortgage underwriting process involved, you may be able to close on an all-cash offer in as little as a week or two, once title is clear.

Typically, cash offers tend to be more common in these scenarios:

• An investor (or investment company) is interested in the property
• The buyer has just sold another home and has proceeds from the sale
• The seller has approached an iBuyer about buying the house
• There’s lots of competition and a buyer wants to stand out
• The property is in need of repairs or renovations and is attractive as a fix-and-flip home

Pros of making a cash offer:

• They give more confidence to sellers
• The buyer can offer a faster closing period
• Your credit score isn’t a factor in the process
• You don’t need an appraisal
• You can save money over time on interest payments
• You reduce the paperwork and documentation required

Cons of making a cash offer:

• It ties up a significant amount of money in one asset
• You won’t be able to use tax deductions on mortgage-related expenses

When making a cash offer, be conscious of the other expenses, such as inspections (if you conduct one), repairs (after closing), and closing costs.

Before deciding whether it makes sense to sell to a cash buyer, or list with an agent, make sure to weigh your options and the pros & cons.

Pros of accepting a cash offer as a seller:

• No risk of buyer financing falling-through
• The closing process can happen faster
• There typically won’t be an appraisal
• You may avoid some other contract contingencies
• You may avoid commissions and repairs (depending on the buyer)

Cons of accepting a cash offer:

• It may be lower than other offers
• You may, or may not, have agent representation

Whichever route you choose, whether listing on the market or selling to a private buyer, or investor, make sure to do your due diligence and properly vet your buyer before accepting their offer.