Table of Contents
- What is a Cash Offer in Real Estate?
- Which Scenarios Make Cash Offers More Ideal?
- How Does the Selling Process Work?
- Selling for Cash: The Pros
- Selling for Cash: The Cons
- Learn More About Real Estate
When most people think of a cash offer, they imagine a wealthy person coming to the negotiable table with a briefcase full of money. When it comes to making a cash offer on a house, things are rarely that dramatic.
Selling for cash is a straightforward process that can benefit both the seller and homeowner. Whether you want to sell your home immediately or in the future, we’ve created the perfect guide for you.
In this article, we’ll explain the pros and cons of selling for cash. This way, you can determine if this selling process is right for you.
What is a Cash Offer in Real Estate?
Before we get into the pros and cons of selling for cash, let’s start with the basics. What’s a cash offer in the first place? How is it different from the normal process of selling a home?
A cash offer is simple a direct home buying transaction. The buyer is fronting all the cash to buy the home instead of relying on financing, like taking out a mortgage loan.
To the average seller, it doesn’t matter how the buyer pays. Taking out a mortgage or having all the cash ready ends in the same result: the house is sold.
Besides, selling a home for cash can help both parties avoid the long financing process. This had led to 24% of most home purchases being made with cash offers.
Which Scenarios Make Cash Offers More Ideal?
Accepting a cash offer isn’t for everyone. Some people may enjoy the security of knowing they’ll be paid by legitimate bank financing. Others simply don’t care where the money comes from, as long as their home is sold on their terms.
The following scenarios are usually where cash offers are more welcome:
Homes at Risk of Foreclosure
Foreclosure can be a depressing situation for any homeowner who has spent a long time building equity. If you’re looking to buy another home in the future, it’s simply not an option.
A lot of people resort to selling their home for cash to avoid the painful foreclosure process. This way, they can save their credit, avoid eviction, and quickly move on from their financial hardships.
Homeowners Making Life Changes
Homeowners often need to move quickly when they experience sudden life changes, such as:
- Getting married or divorced
- Experiencing major illness
- Dealing with a death in the family
- Moving forward with retirement or a new job
People facing these scenarios often want to sell their homes quickly. This is where selling for cash becomes ideal.
Homes Needing Lots of Repairs
Renovating a home can cost anywhere from $19,800 to $73,200. Many people refuse to spend that kind of money when they feel they can just buy another home.
Though, buying a damaged home is near impossible through convention means. A lot of banks will not finance a home that needs all sorts of repairs.
This makes selling for cash the only alternative. This way, a buyer can purchase a fixer-upper without going through a lot of financial red tape.
How Does the Selling Process Work?
Selling a home for cash is a simple process. It’s usually completed within these steps:
- Negotiation: The seller works out negotiations with the buyer to come up with the sale price and terms
- Purchase: The buyer arranges a cash transfer of the funds to the seller
- Closing: The seller receives the funds and signs the property over to the buyer
It’s worth mentioning that the seller can agree to finance the home according to their homes. Usually, the buyer will be responsible for paying the closing costs.
Selling for Cash: The Pros
If you’re considering accepting a cash offer on a house, you’re not short of any benefits. Let’s check it out below:
Cash Offers are Stronger
In a tight seller’s market, accepting a cash offer is your best option. This way, you can move forward with selling your property with the least amount of resistance.
People making cash offers already have the money available versus someone who has to qualify for traditional financing. Even lenders prefer cash offers.
When banks are getting rid of their portfolio of foreclosed homes, they need to sell quick and make a profit. Because of this, cash offer bids will beat traditional ones.
You Can Save Money
Accepting a traditional home offer means thousands of dollars in closing costs that include:
- Credit checks
- Processing fees
- Appraisal fees
- Document and loan origination fees
Both buyers and sellers hate the expensive closing process, which is why selling your home for cash may be the better option.
Cash Sales are Quicker
Since there is no bank to act as the liaison, cash home sales happen quicker than traditional sales. This is because the buyer already has the money available and just has to agree to the seller’s terms.
This is greatly beneficial for sellers that want to move in a hurry and avoid the long underwriting process.
Selling for Cash: The Cons
Again, selling a home for cash isn’t for everyone. If you’re considering all the angles of this decision, here are some drawbacks you need to see:
Cash Offers are Limited in Supply
The most obvious drawback of cash offers is that many people don’t have the money in the bank to make a substantial purchase. This is the main reason why mortgage loans are so popular in the first place.
If a cash offer falls through on your end, it can be difficult finding another credible one.
The Cash Offer May Not Be What You Want
If you’re desperate to sell your home quickly, you may have to take what you can get. People making cash offers usually want a great deal, and that may come at the expense of getting the price you want.
Learn More About Real Estate
As you can see, accepting a cash offer has its fair share of pros and cons. Before you make a decision, you need to make sure you’re possibly getting the best deal you can in the current market.
Do you want to learn more helpful real estate tips? If so, check out our blog for more helpful articles.