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8 min read Nov 16, 2022

The Pros and Cons of an All Cash Offer for Home Sellers and Buyers

Pros and Cons of a Cash Offer on a House

Even in a cooling market, cash offers are more common than you think. Almost one-third of US homes sold in July 2022 were all-cash transactions.

With rising mortgage rates and expensive financing, cash offers will be even more attractive for home sellers and buyers alike well into 2023. In this post, we will look at the pros and cons of a cash offer on a house for buyers and sellers.

    👉 Get Top Dollar Cash Offers On Your Terms: Major cash buyers, including Opendoor and Homevestors, have submitted offers on Houzeo properties. An MLS listing via Houzeo.com gives you maximum exposure. List NOW!

What is a Cash Offer on a House?

A cash offer in real estate means the buyer would purchase a house without any financing or mortgage loan. The buyer would buy the property either with a check or via a wire transfer. This means the buyer has the entire sale amount in their bank account.

How Common are Cash Offers on Houses?

Cash offers on houses are more common than you think.

In the second quarter of 2022, 35.4% of single-family home sales were all-cash purchases. Several metropolitan cities have more cash purchases than traditional home sales. These include Naples, Youngstown, Salisbury, Atlanta, and Utica.

Cash offers on houses are more common under the following circumstances:

  • A real estate investor is interested in your property
  • Home seller approaches a cash home buyer or an iBuyer
  • The seller wants to sell their house as is to skip expensive repairs
  • Your property is located 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 have an edge over traditional buyers in the near future.

Pros and Cons of an All Cash Offer: For the Seller

Here are some of the pros and cons of a cash offer on a house for the seller:

Benefits of Accepting a Cash Offer on a House

1. The Closing is Simpler and Quick

Buyers opting for mortgage financing close within 30-60 days after the house goes under contract. The closing timeline gets affected by the type of loan opted for by the buyer. First-time home buyer loans such as an FHA loan will further push your closing timeline due to stricter approval criteria.

With an expedited closing process offered by most cash buyers, you can close in as few as 7 days. With no mortgage financing involved, the paperwork reduces significantly. You only have to sign the deed, transfer the title, receive the check, and hand over the keys.

» Companies that Buy Houses for Cash: Top cash buyers that offer a fast closing

2. You Will Skip 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 financing contingency involved in the transaction.

3. 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 may skip appraisal. You are also very likely to bypass home inspection. However, an investor looking for a good ROI might go for a home appraisal and inspection.

4. Lower Risk 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.

5. You get Instant Cash in a Difficult Situation

Cash offers are the best if you are going through a tough time like divorce or job layoff. You get instant cash by selling your house as is to institutional cash buyers of iBuyers.

» Selling a House As Is: 8 questions you must ask before selling as is

Drawbacks of Accepting a Cash Offer on a House

1. You Might have to Settle for Less

Traditional cash home-buying companies make lowball offers. They can go as low as 30% of the market value. As per a study conducted by researchers in the Rady School of Management at the University of California, home sellers accept cash offers 12% lower than financed offers.

2. You Might Pay High Hidden Costs

Cash home-buying companies lump in several hidden costs which they generally term as “service fees”. This may be as high as 13% of the home sale price.

Pros and Cons of an All Cash Offer: For the Buyer

Here are some of the benefits of an all-cash offer along with risks for cash home buyers:

Benefits of Making a Cash Offer on a Home

1. You will Save Hundreds of Thousands in Mortgage Payments

To finance a $300,000 home today (using a 30-year, fixed-rate mortgage at Freddie Mac’s current rate of 7.05%), you’d spend a whopping $422,157 in interest over the next 30 years.

Mortgage rates in the US are projected to rise even more in 2023. Making a cash offer on a home will save you a fortune that you can invest somewhere else.

2. Home Sellers will Find Your Offer More Appealing

Lower risk of fall through, simpler & quicker closing, and lesser contingencies, make cash offers attractive for home sellers.

3. You will cut down on the Closing Costs

Since you skip financing you bypass all the lender-associated closing costs. This includes application reviewing costs, loan origination costs, and even home appraisal costs in some cases. As per a study, over the past 40 years, all-cash home buyers on average paid 11% less than mortgage home buyers.

Drawbacks of Making a Cash Offer on a Home

1. A Significant Liquidity is Tied Up

A big chunk of your investment gets trapped in a non-liquid asset. If an emergency arises, you will have limited liquid funds in hand. Assess such emergencies before making a cash offer on a house.

2. You Will Skip Some Important Steps

When getting a mortgage, the lender requires the buyer to get the property appraised. By making a cash offer you might skip the home appraisal, making yourself susceptible to overpaying.

3. You will Lose Out on the Mortgage-related Tax Benefits

Mortgage payers enjoy tax incentives in the form of mortgage interest deductions, property tax deductions, mortgage discount points, and more. By making a cash offer on a house you would miss out on such tax-related benefits.

Bottom Line

There are pros and cons of a cash offer on a house for both ht parties involved in the transaction.

In a hot seller’s market, an all-cash offer makes cash home buyers stand out from the competition. Whereas, in a cool real estate market, buyers save hundreds of thousands of dollars in mortgage payments. But, buyers miss out on mortgage-related tax benefits and skip important steps in the closing.

For home sellers, the advantages of a cash offer on a house outweigh the drawbacks. Access to hard cash, fewer contingencies, fast closing, and lesser fall-through risk are some of the benefits of a cash offer on a house.

Get on the MLS

To attract maximum cash offers you should list on the MLS. Your house gets 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

🎖️ Max Exposure to Cash Buyers

Houzeo

  • Service Fee: $349 Listing Fee
  • Available in 80+ U.S. Markets
  • 5 Stars 4.9/5.0 (out of 4,295 reviews)

Houzeo is the best option if you’re looking for multiple cash offers. An MLS listing via Houzeo.com provides exposure to the max number of cash buyers. This includes Opendoor and Homevestors, who have recently submitted cash offers on Houzeo.

  • Service Fee – $349: Houzeo does not charge a 5% service fee or any undisclosed closing fee.
  • Maximum Cash Offer: Your property will get max exposure to cash buyers via the MLS. This includes major portals like Zillow, Realtor.com, and Redfin. All local and national cash buyers, including iBuyers, will be aware of your listing and compete for it.
  • Types of Properties: On Houzeo Marketplace, you can market properties in any condition and sell your house as is.
  • Flexible Closing Date & Offer Terms: You can specify and negotiate the cash terms you want for your closing.
  • Nationwide Coverage: Houzeo is available in 47 states across the U.S. so you can market to local cash buyers almost anywhere.

👉 Our Take: For sellers looking to maximize their cash offers, we recommend Houzeo’s Gold plan. It will get you maximum exposure to cash buyers via the MLS. You will also have Houzeo’s advanced features to negotiate the best terms for your cash offer.

» Houzeo Reviews: Learn why Houzeo is America’s Real Estate Super App

  • Near Nationwide Coverage: Houzeo covers 47 states + DC.
  • No Listing Agent Commission: With Houzeo, you only pay a small flat fee to get access to the MLS and all the Houzeo tech
  • 100% online: Easy listing, fast changes, online showings, and online offers
  • Max Exposure: Listings get syndicated to Zillow, Realtor.com, Trulia, Redfin, and 100s of other real estate sites
  • Fast Listing: Rush listing option gets you listed within a business day with Houzeo Concierge. This is best to sell your house fast.
  • Real Estate On the Go: Houzeo Mobile App mimics most functionality of the Houzeo web platform, including Offers and Showings
  • 5-Star Customer Service: Superb support that minimizes Houzeo complaints
  • No Hidden Fees: There are no Houzeo hidden fees

» Is Houzeo Legit: Learn more about Houzeo.com’s locations and services

Houzeo has a stellar rating of 4.9 out of 5 stars, with reviews on popular sites like Google & Trustpilot.

» Houzeo Reviews: Check out what customers have to say about Houzeo.com!

Houzeo is available nationwide with coverage in 200+ markets.

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.

What is Houzeo?

An overview of what the platform is all about

Start Your MLS Listing NOW!

» 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)

1. What are the benefits of a cash offer?

The following are the benefits of a cash offer on a house:

For Home Buyers:
1. Buyers save hundreds of thousands in mortgage payments
2. Cash Offers are more appealing to home sellers
3. Cash Home Buyers save on closing costs

For Home Sellers:
1. Easier and quicker closing process
2. The home seller might skip contingencies like home appraisal and home inspection
3. There is very little or no risk of the buyer falling through

2. Should I accept a cash offer for my home?

It depends on the offer as well as the home seller. If you want to sell your house fast or do not have much time for repair, sell your house for cash. Accepting a cash offer is also ideal for sellers who do not want to deal with too many contingencies.

3. How does an all cash offer benefit the seller?

The benefits of all cash home offer for a home seller are as follow:

1. Easier and quicker closing process
2. The home seller might skip contingencies like home appraisal and home inspection
3. There is very little or no risk of the buyer falling through

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Cash Offers Pros and Cons of a Cash Offer on a House

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