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What Is a Cash Offer in Real Estate? Here’s What You Need to Know

At HomeLight, our vision is a world where every real estate transaction is simple, certain, and satisfying. Therefore, we promote strict editorial integrity in each of our posts.

2021 was a hot year for real estate across the United States. The majority of real estate agents saw prices increase in their area, driven by a mismatch between housing supply and demand. As buyers competed to win their bids on new homes, home prices skyrocketed — in fact, 29% of buyers purchased their homes above asking price, according to a 2021 report by the National Association of Realtors®.

Throughout the year, competition became about more than just the highest price. Buyers realized another way to entice sellers to choose their purchaser: a cash sale. In the middle of 2021, cash sales made up 23% of home sales thanks not only to direct buyers and iBuyers, but traditional buyers eager to purchase a home.

One of the reasons for the increased popularity of cash offers in real estate is that they benefit both the buyer and seller. The sales process can be quicker and less stressful with a cash transaction when a mortgage isn’t involved. Buyers can save money in the long run while sellers find decreased risk that a sale will fall through. This all adds up to cash offers being a win-win solution for homebuyers and sellers everywhere.

What is a cash offer, and how common are they?

A cash offer in real estate basically means that the buyer does not finance the purchase with a mortgage. Instead, they purchase the house with a check or wire transfer for the full amount. A cash offer just means that the buyer has the full sale amount in their bank account.

You might not think that many people have the liquid assets to purchase a home for cash. But all-cash sales are actually increasingly popular. In January through June of 2021, almost one third of home purchases were cash sales. In 2021’s seller’s market, many buyers were able to win bids thanks to cash offers. Cash transactions generally mean a quicker closing process, which entices sellers to accept cash bids.

If you’re considering buying or selling a home for cash, it’s important to keep in mind that a cash deal doesn’t necessarily negate closing costs. These costs are generally less in a cash sale than a traditional sale, but they still need to be covered.

Who makes cash offers in real estate?

The first is pretty simple: a traditional buyer with the liquid assets to pay cash. These are individuals or families who are purchasing a house or condominium for their living space. A traditional buyer might have this cash ready for a home purchase if they’ve recently sold their last home and held onto the cash from the sale to avoid a mortgage on their new home.

Many direct buyers and iBuyers also will purchase houses with cash. These companies generally aim to purchase a home without financing and close quickly so they can rehab or flip the property and turn a profit.

Sellers hoping for a cash transaction rather than a mortgage-involved sale may benefit from HomeLight’s Simple Sale. After you answer a few short questions, we’ll provide you with a competitive offer that helps you sell quickly. Since there are no hidden fees or agent commissions, you’ll have the confidence that you’re selling the fastest way for a competitive cash offer.

Speed Up Your Home Sale with a Cash Offer

Use HomeLight’s Simple Sale platform to sell when you’re ready without the hassle of paying for repairs, prepping for listing, or dealing with showings.

Why are cash offers great for sellers?

Cash offers are great for sellers for many reasons. Here are two main ways that sellers can benefit from a cash sale compared to traditional sales in which the buyer needs to finance a mortgage:

  • Speed of transaction. Particularly when you use HomeLight’s Simple Sale platform, can sell in a matter of weeks, not months. Cash sales involving direct buyers, flippers, or iBuyers can dramatically cut down on the average of 49 to 56 days that it otherwise takes to close on a traditional sale.
  • Less risk. A buyer proposing an all-cash offer may be willing to waive an appraisal, which mortgage lenders will often require to ensure they’re not financing an overvalued asset.

It’s easy to be tempted by a cash offer for your home. After all, what could be better than a quick sale for a great price? Some research shows that cash buyers pay an average of 12% less than financed buyers, as financed buyers are more likely to have to compensate for the risks to the sale that come with a mortgage in the form of a higher offer. Working with a top agent like George Kypreos can increase your chances of selling for your ideal listing price.

In Kypreos’s market, “cash offers are paying just as much as financed offers,” he says. “If I had the choice…I would rather entertain a cash offer because there’s just less red tape and risk.”

Because experienced real estate agents keep up with market trends and are experts in their respective geographical areas, partnering with a top agent can really increase your chance of selling for top dollar. And the general population is aware of how a great agent can speed up and smooth out the process! — 87% of recent homebuyers worked with an agent or a broker.

Why are cash offers great for buyers?

Cash home sales aren’t just great for sellers—they also provide many benefits to homebuyers. Cash transactions accounted for 24% of home sales in October 2021, so non-mortgaged transactions are hardly a thing of the past. However, it’s important to weigh the pros and cons of buying a house for cash.

Here are a few ways that a buyer can benefit from a cash purchase:

  • Lower purchase price. Paying cash for a house can save you money on the listing price. Sellers are often willing to accept a lower cash offer for a fast and hassle-free sale as opposed to dealing with the sometimes months-long traditional sale process.
  • No mortgage interest. One huge benefit to paying cash for a home is, obviously, that you don’t have a monthly mortgage payment. As mortgage rates are expected to continue to rise in 2022. Paying cash for a home can save you money in the long run since you don’t have to pay the high interest rates or go through the nuisance of refinancing every couple of years when a lower interest rate presents itself.
  • Tax implications. Although the buyer may not be eligible for as many tax write-offs as they might be in a mortgaged home purchase, the seller is actually the one taxed on a cash purchase if they made a net gain on the sale.

Buying a home for cash can save you money in the short term and in the long run. Before you decide whether to proceed with a cash purchase, talk to your real estate agent to make sure you’re making the right offer for the right home to fit your needs!

HomeLight Cash Offer™ helps both sellers and buyers

A cash transaction offers fantastic benefits to both sellers and buyers. And HomeLight Cash Offer™ — currently available in California, Florida, Arizona, Texas, and Colorado — adds to these benefits! Sellers that use our Cash Offer™ program have the confidence of a sale since we’ll buy your house even if your buyer backs out. Cash offers are 3x more likely to win and can get you a 5% savings, on average, versus offers with a loan.

A home transaction can be a stressful experience for both the buyer and the seller. Buying or selling for cash can reduce the stress on both sides of the transaction. So if you’re putting your home on the market or starting to look for your next dwelling, keep your mind open to a quick and easy cash sale!

Header Image Source: (Anton Marchuk / Unsplash)