Is a Cash Offer on a House Better?
As a seller there is the possibility that you receive two offers, a cash offer and a financed offer.
You may be wondering:
Is a cash offer on a house better than the financed offer?
This question isn’t a simple yes or no as many factors should be considered first including both benefits and precautions when considering a cash offer.
We have come up with a detailed explanation to help you understand is a cash offer on a house better for you!
Is a Cash Offer on a House Better?
When you have put your house on the market, the ideal situation is to get at least two or more offers!
In sales the winner is the highest offer but in real estate this is not always the case. The offers are subject to whether they are a cash offer or a financed offer.
So, which one is better?
The best offer is the cleanest offer.
The cleanest offer tends to be the cash offer as it is more likely to close. With financed offers you have a higher risk of them falling through due to an appraisal or the buyer not being eligible for a loan.
Other things to consider with financed offers is that an appraisal and inspection are mandatory.
Once the property is appraised it is then valued in comparison to a selection of other properties.
If the house fails to appraise for the purchase price, the buyer’s loan will subsequently become subject to a 20% down payment.
Why does this matter?
This means that the loan will then only be approved if the buyer pays a 20% down payment or you, the seller, discounts the purchase price. Either situation this is not ideal.
As a seller, this additive time for inspection and appraisal can be costly on finding other buyers who can afford the 20% down payment.
Benefits of a Cash Offer
From the above, it seems clear the answer to is a cash offer on a house better is yes!
There are a few additional benefits to opting for a cash offer as well.
- Certainty of Closing
A cash offer is more secure than a financing transaction.
It eliminates the risk that the financier will reject the buyer’s loan application.
There is also no requirement for appraisal which removes any concerns you may have had on that process affecting the completion of your sale.
- Time Spent
With a cash offer your time spent closing is minimized!
Cash offers in general have a close rate of about seven to 10 days but can be closed as quickly as two days!
A financial approval for a loan can take between 21 to 30 days to close on a house.
- Less Risk for Sale to fall through
The main reasons that sales fall through are due to the buyer not qualifying for a loan or the purchase price does not meet the appraisal.
With a cash offer, you eliminate the main fall through risks as once the cash has been paid, the deal is closed.
Cash Offer Precautions
Although the answer to the question: Is a cash offer on a house better is yes, there are some precautions that one must take as a seller:
- Check Your Cash Source
As a seller, you must ensure that your buyer in fact has the cash needed and understand what type of cash it is.
The buyer should have enough money in their bank account to cover both the purchase price and the closing costs.
Be sure your buyer does not intend to sell the property and use that as the cash to buy your property.
- Cash Offers with Subject of Appraisal
Although it is not required like it is for financing offers, cash offer buyers still reserve the right to appraise and inspect the property before closing.
This precaution is important since if the buyer is not happy with the outcome they can then negotiate purchase price or change their mind.
If you receive a cash offer buyer subject to an appraisal, do not assume your sale is guaranteed to close and continue to proceed with precaution.
- Low Cash Offers
The final precaution is to be watchful of buyers who are offering extremely low cash offers.
If you are desperate to sell your house due to any other circumstances, do not let your buyers know.
If a buyer is aware you need to sell fast, they can and will make an extremely low offer which may have greater negative effects.
Overall, our answer to is a cash offer on a house better is yes. The risk of things not working out is minimized and the timeline is shorter.
But, do take into account the precautions.
If you have a house to sell and you’re thinking, “I want to sell my house fast ,” you’re in luck!