Should I Take An All-Cash Offer On My House?
Selling your house “for cash” doesn’t mean you’re trading it for a briefcase full of hundred-dollar bills, like in the movies. Rather, a buyer who makes an all-cash offer has enough liquid funds to cover the full price upfront. Instead of financing the purchase with a mortgage loan, the buyer will simply pay you directly, just as if they were buying anything else.
These offers have become increasingly common in today’s hot housing market. In fact, a recent study found that one-third of U.S. home purchases were made in cash earlier this year, the highest share in almost 10 years. While an all-cash offer might sound appealing to sellers, these deals can be complicated. Here’s what to know before you accept one.
Should you accept an all-cash offer to sell your house?
Whether your buyer pays in cash or is financing the purchase, you’ll get paid either way. However, accepting an all-cash offer can speed up the process significantly, since you don’t have to wait on lender underwriting and approval. Plus, all-cash offers are less likely to fall through, since your buyer isn’t relying on a loan application that could be denied. If you are lucky enough to have multiple offers, a cash one can certainly be more appealing than one that hinges on a lender’s eventual approval.
That said, there are downsides too. Cash offers are often lower than finance-contingent ones — a “discount” cash buyers can give themselves, since they know they’re making things faster and more efficient for you. And you’ll need to be wary of scammers who prey on what they perceive as desperation of buyers seeking a quick cash sale to resolve financial difficulties.
Ultimately, deciding whether an all-cash offer is right for you will depend on whether you want to sell as fast as possible. If your main concern is simply getting the property off your hands and collecting the cash, it’s a great option. But if you have the time and want to aim for top dollar, you might get a better offer from a buyer who’s financing.
Who buys a house with cash?
Cash transactions often take place in markets where homes are extremely affordable, making it more likely for buyers to have the full amount available, or in markets where deep-pocketed individuals might be looking for investments or second homes.
All-cash buyers typically fall into one of the following categories:
Traditional homebuyers: A traditional buyer with lots of liquid funds available might prefer to make an all-cash offer, saving the hassles associated with financing and eliminating the substantial expense of interest on a long-term loan.
Cash-home buying companies: You might have seen TV spots and road signs advertising local or even nationwide homebuying companies. These operations usually have slogans like “we buy any home” or HomeVestors’ “we buy ugly houses.” They buy homes in almost any condition and can close the deal very quickly, but they typically offer a low-end price.
iBuyers: Similarly, online iBuyers can make cash offers and close deals with lightning speed. Also similarly, the offer you get from one likely won’t be as high as you could get with a traditional sale. Opendoor and Offerpad are two of the biggest players, but neither one operates in every market in the country.
House flippers: These individuals or small companies buy homes in poor condition, fix them up and sell them for a profit. They are unlikely to purchase homes already in good condition
Why all-cash offers are better
While all-cash offers might not earn you the best possible price, they do provide significant perks for sellers:
Less waiting: Accepting an all-cash offer means that you avoid time-consuming steps like waiting for the buyer’s financing to be approved, and thus get to the closing table faster.
Less paperwork and bureaucracy: Cutting out the lender also means cutting out much of the paperwork and hassles associated with a traditionally financed sale.
Less risky: Without financing or a lender-required appraisal contingency, an all-cash transaction is less likely to fall through — cash is more of a sure bet.
Less work: Cash offers from iBuyers or homebuying companies often mean you can sell your home as-is, saving you the hassles associated with staging your home and making repairs ahead of listing.
