Cash Offer on a House: Here’s Why You Should Consider It

Even in a cooling market, cash offers on houses are more common than you think. 26% of US homes sold in November 2022 were all-cash transactions.

With rising mortgage rates and expensive financing, cash offers will be even more attractive for home buyers and sellers alike well into 2023.

What is an All Cash Offer on a House in Real Estate?

A “cash offer” in real estate means the buyer would purchase the house without any financing or mortgage. The buyer has the entire purchase amount in their bank account and they would pay via a wire transfer or check.

👉 Get Top Dollar Cash Offers On Your Terms: Cash buyers such as Opendoor and HomeVestors have made offers on Houzeo properties. An MLS listing via Houzeo.com gives you maximum exposure. List NOW!

How Common are Cash Offers for Houses?

Cash offers on houses are more common than you think.

As of November 2022, 26% of US home sales were all-cash transactions. In fact, cash home purchases have exceeded traditional home sales in several metropolitan cities. These include Naples, Youngstown, Salisbury, Atlanta, and Utica.

Cash sales take place under the following circumstances:

• A real estate investor has shown interest in your property.
• A home seller approaches a cash home buyer or an iBuyer.
• You want to sell your home as is to skip costly repairs.
• Your property is in a hot seller’s market, and the buyer wants to stand out.

With interest rates doubling over the past year, cash home buyers will be more popular than traditional buyers in 2023.

Accepting Cash Offers When Selling a House

Here are the questions you should ask before you accept a cash offer on your house.

What are the Pros and Cons of Accepting a Cash Offer?

Home sellers indeed prefer cash home offers over financed ones. But they have their drawbacks. It is better to weigh the pros and cons of a cash offer before accepting one.

Benefits of Accepting a Cash Offer on a House

• Lower Risks of a Deal Falling Through: 16% of purchase agreements fell through in July 2022. A cash-backed offer assures sellers that the buyer won’t back out if they fail to secure a mortgage.
• You Will Skip the Financing Contingency: The cash buyers have all the needed funds in their bank accounts. They directly give sellers a check or make a wire transfer. Thus, there is no finance contingency clause involved in the transaction.
• You will most likely By-pass Appraisal and Inspection Contingencies: Usually, mortgage lenders require buyers to appraise the property. With no lender involved in an all-cash sale, the buyer can skip the appraisal. You are also very likely to bypass the home inspection. However, an investor looking for a good ROI might go for a home appraisal and inspection.
• The Closing is Simpler and Quicker: With no mortgage financing, the paperwork and the closing process become simple and quick. You only have to sign the deed, transfer the title, receive the check, and hand over the keys to the new owner.

Risks of Accepting a Cash Offer on a House

• You Might have to Settle for Less: As per a study, home sellers accept cash offers 12% lower than financed offers.
• You May Incur Significant Hidden Costs: Cash home-buying companies lump in several hidden costs, which they generally term “service fees.” This may be as high as 13% of the home sale price.

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Should You Accept a Cash Offer for Your House?

Yes, you should accept a cash offer on your house. Cash offers have fewer chances of falling through and have no financing and appraisal contingencies. Also, several cash buyers skip the home inspection contingency.

In a cash home sale, you are very likely to receive cash offers below the home’s fair market value. These can be as low as 50% of what the home is worth.

That being said, there are cash buyers like iBuyers who make instant cash offers as high as 100% of the market value. So, if you get a cash offer that’s close to the market value, we recommend you accept it.

» Pros and Cons of a Cash Offer on a House: Read before you accept a cash offer.

Making Cash Offers When Buying a House

For a cash home buyer, the stakes are very high because they risk losing liquid funds. So, get answers to all your questions before you make cash offers on houses.

What are the Pros and Cons of Making a Cash Offer?

Just because you have the cash doesn’t mean you should make an offer on a house. Assess both the pros and the cons before bidding on a house for sale.

Benefits of Making a Cash Offer on a Home

• You Save Hundreds of Thousands in Mortgage Payments: Mortgage rates in the US are set to increase in 2023. By making a cash offer on a home, you save several hundred thousand that you can invest somewhere else.
• Your Offer will Appeal to Most Home Sellers: Lower risk of falling through, a simpler and quicker closing, and fewer contingencies, are some of the reasons why cash offers appeal to most home sellers.
• You will cut down on the Closing Costs: Since you will be skipping financing, you will save all the lender-associated closing costs. This includes application review costs, loan origination costs, and even home appraisal costs in some cases.

Risks of Making a Cash Offer on a Home

• A Significant Liquidity is Locked Up: A big chunk of your investment gets trapped in a non-liquid asset. If an emergency arises, you will have limited liquid funds on hand. Assess such emergencies before making a cash offer on a house.
• You Might Skip Some Important Steps in the Transaction: When getting a mortgage, the mortgage lender requires the buyer to get the property appraised. While making a cash offer, you have no such obligation, and you might end up overpaying.
• You will Lose Out on Mortgage-related Tax Benefits: Mortgage borrowers enjoy tax incentives in the form of mortgage interest deductions. As a cash buyer, you will miss out on these benefits.

» Pros and Cons of a Cash Offer on a House: Read before buying a home for cash.

When Should You Make Cash Offers?

Making a cash offer under the following circumstances would make you the most profit:

It is a Hot Seller’s Market

Home sellers get several offers in a hot seller’s real estate market. You can stand out from the competition by making a cash offer. Access to hard cash and faster closing makes cash offers on homes more appealing than financed offers.

Interest Rates are High but You Have Cash

With mortgage rates touching record levels, cash purchases can save you a fortune in mortgage payments.

How to Make a Cash Offer on a House?

Here are the steps to making a cash offer on a house:

Step 1: Make an Offer

Present your offer to the home seller or the seller’s agent—either directly or through FSBO sites like Zillow. We recommend you hire a licensed real estate attorney to draft an offer.

Step 2: Negotiate the Purchase Price

Negotiate with the home seller to bargain the purchase price. Pitch your best offers, like letting go of some contingencies, etc., to negotiate effectively.

Step 3: Furnish Proof of Funds

Showcase a written letter from your bank or your bank account statement to confirm that you have the required funds.

Step 4: Conduct a Home Appraisal and Inspection

This is an optional step but is highly recommended. A home appraisal protects you from overpaying for the house. On the other hand, a home inspection conducted by a professional home inspector ensures you do not buy a property with serious defects.

Step 5: Sign the Purchase Agreement

Once the above contingencies are fulfilled, both parties sign the sale contract. It contains all the terms and conditions involved in the transaction.

Step 6: Make an Escrow Deposit

Open an escrow account and deposit the earnest money into that account. Escrow deposits provide an added level of security to the transaction.

Step 7: Get a Title Report

A clear title and a meticulous transfer are keys to a real estate transaction. Title insurance protects you if there is any problem related to the prior ownership of the property. It makes you whole in the event of a legal dispute related to the title.

Step 8: Transfer of Ownership

Get the ownership transferred by signing the deed and depositing the balance in the escrow account.

» How to Make a Cash Offer on a House: Learn how to make an all-cash offer.

How to Make a Cash Offer Without Cash?

You can make a cash offer on a house without cash through cash offer loan options. Some cash buyers approach cash offer companies to buy a property on their behalf. Later the buyers repurchase the property from the company with mortgage financing.

Let’s see how cash home financing works:

• The cash financing company invests its own money on your behalf.
• Cash financing companies offer quick closings to entice home sellers.
• Impressed home sellers accept the cash offer, beating all other offers in their arsenal.
• Once the transaction is complete, the company holds the property while you shop for a mortgage.
• You buy the property from the company with the money obtained from the mortgage lender.

Several cash-offer companies, like Ribbon Cash Offers, Better Cash Offer, Homeward Cash Offer, Opendoor, etc., offer all-cash offer financing. For the cash offer programs, cash offer financing companies charge 1%–3% of the purchase value as their service fee.

» How to Make a Cash Offer Without Cash: Discover how to make an all-cash offer with no cash.

How to Beat a Cash Offer on a House?

Here are the four tactics to beat a cash offer:

1. Make an Offer at the Listing Price

Most make cash offers 20%–30% below the listing price. Making a cash offer at the listing price will give you an edge.

2. Write the Home Seller an Offer Letter

Write a personalized offer letter mentioning your interest in the property. This can help you stand out from the other buyers. Make sure to use words and phrases that depict your seriousness.

3. Include an Escalation Clause in the Contract

An escalation clause lets home sellers know that you are willing to raise your cash offer if the sellers receive a more competitive offer. It shows you are flexible with your offer.

4. Waive Some Contingencies

To reach the closing process quickly, you may waive off some contingencies like a home inspection and appraisal.

» How to Beat a Cash Offer on a House: Discover how to defeat an all-cash offer on a home.

Is an All-Cash Offer on a House Better?

Yes, an all-cash offer on a house is any day better than a mortgage-financed sale.

Home buyers save hundreds of thousands in mortgage payments. Also, with mortgage rates set to rise in 2023, a cash offer will save buyers even more. For an investor or a house flipper, a cash offer is the most efficient way of making an offer on a house.

Whereas, for home sellers, a cash offer is always the best option. An all-cash offer involves fewer contingencies and facilitates a faster closing. Also, the home seller gets cash, which you can easily trade for other investments.

List Your Property on the MLS

To attract maximum cash offers you should list on the MLS. Your house is marketed to all types of buyers nationwide, including cash buyers. Homes listed on the MLS sell faster and for 17% more.

Maximize Your Cash Offers with Houzeo

Houzeo is the best option to attract maximum cash offers. Houzeo lists your house on the MLS for a small flat fee instead of a 3% real estate agent commission. An MLS listing markets your house to nationwide cash home buyers.

With Houzeo, you manage your cash home sale without any real estate broker assistance. Houzeo also offers a free listing on its website. Major cash home buyers like Opendoor and HomeVestors have made cash offers for homes listed on Houzeo.com.

More About Houzeo

Eager to Know How Houzeo Works?

We’ve got you covered. Check out the following video to understand how Houzeo works and why it is one of the best For Sale By Owner websites in the U.S.

» NEED MORE CLARITY? Read these exclusive Houzeo reviews and learn why the platform is the best in America’s competitive housing market.

Frequently Asked Questions (FAQs)

Also Read

• Mortgage Protection Insurance Explained: Do You Need It?
• 40-Year Mortgage: What are its benefits?
• What is Mortgage Amortization: How do your mortgage payments work?
• Mortgage Preapproval: What it is and How to Get it?

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