You might associate all-cash offers in the real estate space with fishy, used-car-salesman vibes. Why would you ever sell your house to the folks behind that gaudy billboard on the side of the road? Sure, this email from a mystery buyer overseas with bank statements to match looks super trustworthy… go ahead, take my house!
Today, though, the sell-house-for-cash space is a lot more varied and buttoned up than you realize — not to mention, iterations on the instant-buyer are a growing part of the real estate landscape thanks to technology. There can be real value in accepting a cash offer vs. the 86% of other buyers who need a mortgage, you just need to be smart about who you work with.
Take it from Zachary Flowers, a top-selling real estate agent in the Tacoma, Washington area:
“The number one difference between an all cash offer and a financed offer is that a cash offer is able to close more quickly. In general, a cash offer from a valid to cash buyer is usually a much simpler process. There’s a lot less red tape.”
If you’re suspicious but also curious about the benefits of receiving or requesting a cash offer on your home, read on. This guide to the all-cash offer — specifically tailored to sellers — explains 7 key things you need to know.
1. Cash sales account for a decent chunk of property sales
You’d think it’d be rare for anyone to have enough cash lying around to pay for a house outright. We’re talking hundreds of thousands of dollars! But all-cash purchases accounted for 23.4% of single-family home and condo sales in the second quarter of 2020.
Real estate investors — who can be small-scale business owners or house-buying company conglomerates — are the main reason why all-cash offers make up such a big chunk of the market. Data from the National Association of Realtors (NAR) confirms that investors who often pay in cash purchased 14% of homes in August.
Investors can afford to offer you a fair, all-cash price, and still make a profit when they sell because they may get reduced rates on everything from home repairs to title company fees. And making all-cash offers benefits investors because they can close on home sales much faster paying cash than they could with a mortgaged home purchase.
2. All cash means no mortgage
Most people know that selling a house takes time, anywhere from two to three months depending on the state of the market. What fewer realize is the culprit of the delay.
If you’re priced right and put some effort into presentation, the hard part isn’t always attracting an offer. It’s making it through closing with the deal intact — which can be difficult to pull off if you’re working with a traditional buyer who has to finance their purchase.
Even if you attracted a regular offer in less than 24 hours, you’re looking at an average 46 days to close if you add lender financing to the mix.
So, the biggest differentiator with all-cash is the absence of a mortgage, which speeds up and smooths out the transaction in more ways than one.
Less risk and uncertainty:
NAR reports “issues related to obtaining financing” as the top cause for real estate contract delays or terminations month after month in its Realtor Confidence Index report.
The bevy of hurdles attached to obtaining financing (third-party appraisal, hidden debts uncovered at the eleventh hour) are all solved with the mighty all-cash offer.
“With financed offers, the buyer has to go through numerous different processes such as home inspections, appraisals, underwriting, and a bunch of other sort of barriers to closing the sale,” explains Flowers.
A traditional home sale to a mortgage buyer seems safe because it’s the most common type of residential real estate transaction.
However, it inherently comes with a number of risks. If the buyer loses their job or mortgage falls through for some reason (such as if the house doesn’t appraise), then the deal could fall apart. That’s not an issue with all cash.
Home sellers also take on risk when they invest in fixing up their home before resale. There are some unethical contractors who feed off inexperienced homeowners by charging exorbitant rates because the homeowners don’t have the experience to know any better.
And there’s also risk that your buyer will find additional repairs they want done for even more money after they obtain their home inspection.
When you accept an all-cash offer from an investor, they’re likely buying your home as-is with plans to invest their own money into improvements before either renting it out or flipping the property.
So, while an investor might get a home inspection for their own knowledge and benefit, you won’t need to worry that you’ll be asked to finance any repairs the inspection requests.
Goodbye (to at least some) contingencies:
Along with setting aside worries about the home inspection results, an all-cash sale lets you say good riddance to a lot of contingency stress associated with a conventional sale.
You’re not going to have to deal with a financing contingency, which lets a buyer back out if they cannot finalize their mortgage, because your all-cash buyer isn’t getting a mortgage. The absence of a mortgage also means that your all-cash buyer probably won’t need an appraisal contingency.
“An appraisal is a requirement that banks have before granting a loan on a property. So buyers paying with cash or getting a hard money loan, which functions as cash in this capacity, don’t need to have an appraisal on the house,” explains Flowers’ business partner, Damian Barton.
If your cash buyer still opts to get an inspection (many will, just to ensure due diligence) the process will be a lot less taxing on the seller. The buyer won’t be obtaining an inspection to satisfy any mortgage requirements, and they won’t be using it to nickel-and-dime you especially if you’ve decided to sell “as is.”
Finally, you probably won’t need to utilize the home sale contingency (a contingency that lets the buyer back out if their current home doesn’t sell) because an investor’s purchase isn’t dependent on the sale of another property.
Faster and more flexible closing:
One benefit to accepting an all-cash offer is that it puts a lot more control of the home sale timeline into your hands as a seller because you aren’t at the mercy of the lender’s schedule.
“If your buyer is getting a mortgage on a house, the timeline can vary. Typically you’re looking at about a 30 day closing. But the timeline with a cash buyer is a lot more flexible,” says Barton.
“Cash sales usually close within about a week, but if you need more time, a cash buyer can extend that at closing out for 30 or 60 days, or even longer depending on what the seller’s needs are.”
A fast, flexible close isn’t just convenient, it can also save you money:
“A quick close that doesn’t require a 30 to 45 days to finalize also saves the seller money, because they won’t need to pay the mortgage and other housing expenses on the property for an extra month or more,” advises Flowers.
Title and escrow flexibility:
Accepting an all-cash offer on a house isn’t like selling a car for cash where you can just sign over the title. When you’re selling a house for cash, you’ll still need escrow services and title search.
Since there’s no lender involved, you’ll have more control to shop around for affordable escrow services. But if you’re selling to an experienced all-cash investor, you may not even need to do that.
“Oftentimes cash buyers are willing to cover the title and escrow costs for the seller,” explains Flowers. “This is because cash buyers are often investors who have an agreement with the title and escrow company that allows them a discount that’s called an investor or a builder rate. So they’re paying considerably less than a seller would paying their own closing costs.”
3. Off-market homes will be preferred
You won’t find a whole lot of sellers who receive all-cash offers on a house listed on the MLS. That’s because investors prefer to buy properties that aren’t listed for sale yet — for financial reasons.
“If the house isn’t listed with a real estate agent yet, then a cash sale offers a financial benefit because the seller can avoid paying the agent commission which can be up to 6% of the sale,” explains Flowers.
Aside from skipping the agent commission, selling your home off-market for all-cash also lets you save both time and money in several other ways.
You won’t need to spend time and money on fresh paint, updated flooring, new landscaping, professional staging, pro photos, or any other repairs when you sell your home as-is to an all-cash investor.
You also won’t have to twiddle your thumbs at a coffee shop every time there’s an open house or a private showing — plus you won’t have to wait around just hoping a buyer will make you an offer.
An off-market offer also means you won’t have a whole bunch of strangers parading through your house for weeks or months.
4. All-cash may be lower than other offers
“In general, if someone’s going to pay all cash for your house, you’re going to have to give up something in return, which may impact what you’re going to net on the sale price,” explains Barton.
Yes, the sale price for most cash sales is going to be a little bit lower than market value.
As the seller, you need to look at all the numbers, including what you’ll be saving in housing expenses thanks to a quick sale, as well as any agent commission and closing costs you save, and compare those numbers to the dollars lost due to the reduced sale price.
Once you run the numbers, you may discover that even though you’ll be technically selling for less money, you’ll end up walking away with more cash in hand because of the money you save in those other areas.
And even if it turns out that you’ll net a few grand less than you would with a traditional home sale, don’t forget to factor in less tangible benefits.
An all-cash sale comes with the convenience of a quick close, as well as the fact that you can forgo the appraisal and possibly the inspection.
Plus, cash offers typically come from investors who intend to fix up your home before renting or reselling it, so most won’t bother you with the repair requests you’d likely get from a traditional mortgage buyer.
5. Not all cash buyers are the same
Before you go all gung-ho to accept the first all-cash offer that comes knocking on your door, be aware that not all cash buyers are the same.
Some are experienced investors who’ll have a system set up to make an all-cash sale swift an easy, with few hoops to jump through. Others may be one-time buyers who will expect the traditional protections like an inspection or appraisal contingency.
Here are the types of buyers you’re most likely to receive an all-cash offer from:
- Home flippers – Experienced investors who renovate and sell homes for profit on the regular, who are less likely to require contingencies.
- Buy-and-hold rental investors – Experienced investors who purchase properties as rental properties, who are also less likely to require contingencies.
- iBuyers – These tech-focused all-cash buyers are online real estate companies that use algorithms to calculate a fair offer for your house.
- Wealthy buyers or retirees – Moneyed buyers looking for second homes, or playing in real estate investment. Since these are often first-time all-cash buyers, they are more likely to require some contingencies.
- Equity-rich homeowners – Homeowners who’ve banked up lots of equity and are looking to expand their real estate holdings. Again, these are typically first-time, all-cash buyers likely to require contingencies.
Regardless of which type of buyer makes you an all-cash offer, you need to make sure that they have access to the cash to follow through.
“We’re highly experienced in dealing in the cash buyer business, so we know exactly what to look for in terms of red flags,” explains Flowers. “A legitimate cash buyer should have the ability to show you that they have the funds readily available or at the very least present a letter from a reputable cash lender that you can verify.”
6. Interested in a cash offer? We can help
Given that all-cash buyers typically prefer to make offers off-market, finding one can be a challenge — especially since many investors are slowing down their property investment due to economic uncertainty.
In a time when many cash buyers are hitting pause due to concerns of a recession and uncertainty around the market, a platform like Simple Sale can help you find a cash offer fast, and avoid scams in the process.
With Simple Sale you can tap into the largest network of pre-approved active cash buyers in the U.S. and connect instantly with one who buys homes in your area and price range.
Need an all cash offer on your home?
Find out what cash buyers are willing to pay for your house right now.
7. Selling for cash isn’t your only option
There’s no harm in comparing the pros and cons of requesting a cash offer on your home — and then doing some math to see how much money you’d likely take home at the end of the day. Our handy net proceeds calculator can help you account for all the fees associated with selling.
You’re also welcome to talk with an experienced real estate agent to get a comparative market analysis, which offers a data-backed estimate of how much you can get from a traditional home sale. Your agent will also go over with you all of the costs of a conventional listing, including home prep, repairs, agent commission, and closing costs.
“Each seller has to look at all the options to decide whether it’s smarter for them to list the house for sale or take an all-cash, off-market offer. The first place to start in making that decision is meeting with a real estate agent who can go over all of the numbers,” suggests Barton.
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