If you’re like most home sellers, you probably worry about the time and effort required to prepare for a sale, from staging and cleaning to completing repairs and upgrades.
Perhaps you’re not sure if you’ll be able to find a good real estate agent to work with or if you’d prefer not to use an agent at all. Maybe you’re feeling anxious about the possibility of the sale taking too long, or experiencing stress over the costs associated with selling a home.
Fortunately, there’s an easier way. Accepting a cash offer on a house provides a number of advantages over a traditional sale, like speed, cost savings, reduced time, and (best of all!) lower stress.
But why is an all-cash offer better? Read on to discover the benefits of selling a house for cash.
What Is a Cash Offer on a House?
Let’s start with the basics: What, exactly, is a cash offer on a house? How is this type of offer different from a conventional home sale?
When you hear the term “cash offer,” you might imagine a potential buyer showing up to the bargaining table with a briefcase full of cash, neatly bundled with rubber bands and stacked into thick piles. While this scenario might make for a great scene in a movie, in reality, cash sales aren’t this dramatic.
A cash offer is simply a sale in which the buyer offers the seller the entire cost of the house without using financing, such as a mortgage loan. When a buyer already has enough funds to purchase your home outright, you can both avoid several (long, costly) steps.
From the perspective of the home seller, it doesn’t matter if the money comes from a mortgage loan or a seller’s own bank account. For the seller, the end result is the same: A buyer has purchased your home and paid for it.
The real difference lies in avoiding the many contingencies that pose risks for both the seller and the buyer. And that’s why so many home buyers and sellers alike prefer cash sales: They’re quicker, they’re easier, and they involve fewer hoops to jump through.
For instance, homebuyers who offer cash don’t have to worry about making their way through the financing gauntlet, otherwise known as the most common reason a contingent offer fails. That’s a huge relief for home sellers, too.
Another difference between cash offers and conventional home sales? There’s no requirement to obtain an appraisal. Because the home buyer doesn’t have to be approved for a mortgage loan, there’s no need for an appraisal to determine the home’s value in order to reassure a mortgage lender.
It is true that, at their core, all home sales lead to an exchange of money in one form or another. But cash offers remove so many of the obstacles that the conventional home sale process places between sellers, buyers, and their shared end goal. That’s why cash offers are growing more common.
How Common Are Cash Offers?
Are you under the impression cash sales don’t happen very often? You’re not alone in this misconception. You might be surprised to learn that, according to research by ATTOM Data Solutions, cash sales account for between 22 and 24 percent of single-family and condo sales across the United States in the last two years.
In some parts of the country —such as cities in Florida, Georgia, and North Carolina — these numbers are even higher. Here, the percentage of cash sales ranges from 32.9 to 40.4 percent overall.
Certain scenarios tend to be common components of cash offers. These include:
- A potential buyer has recently sold their home and needs to invest sale proceeds in another property
- A real estate investor or an investment company wants to invest in properties in your area
- A home seller has contacted an iBuyer (“instant buyer) in an attempt to sell the property
- A home buyer wants to stand out or gain an advantage in a highly competitive market
- A property needs serious repairs or renovation
- A home is a good candidate for a fix and flip
Remember that a cash offer can take place at any time, in any scenario, and in any transaction. It’s important for all home sellers to understand how they work before they make decisions about their home sale.
Keep in mind that the number of cash offers shifts depending on factors such as market conditions and fluctuating price points. For example, homes under a certain price may be more likely to financed through mortgage loans, while more expensive properties may draw more cash offers.
Of course, interest rates play a role, as well. When interest rates are low, more buyers may take out loans. Some cash buyers might even pay in cash, then refinance later to take advantage of historically low rates.
What Kind of Homes Are More Likely to Be “Cash Only”?
Of course, every home sellers’ situation is unique. But there are certain scenarios where a cash-only deal just makes sense. Here are a few of the most common home types that may be “cash only.”
Homes at Risk of Foreclosure
Homeowners who are facing foreclosure find themselves between a rock and a hard place. Their financial circumstances mean they can’t make payments on their home and their options feel limited. They’re also facing tough decisions — short sales, bankruptcy, eviction — that can potentially ruin their credit and make life harder for years to come.
A cash sale offers a way out. Accepting a cash offer means saving your credit score, avoiding eviction, and moving quickly on to the next stage in life.
Homeowners Who’ve Experienced Life Changes
When homeowners undergo major life changes, such as marriage, divorce, retirement, a new job, or an illness or death in the family, they often need to move quickly.
They might need to move closer to a sick relative. They may have undergone a divorce and homeownership is a matter of contention. Maybe they’re retired, need to downsize, and can’t wait around for a conventional sale to go through. Perhaps someone has gotten a new job in a new town, and they need to move right away.
All of these life changes may lead to the need to sell quickly and without stress. A cash sale offers a solution.
Homes in Need of Repair
Sometimes, the cost of keeping a home well-maintained is simply too much for homeowners to handle. Whether it’s a cracking foundation, a roof that needs replacing, leaky pipes, or a faulty electrical system, home repairs can run into the tens of thousands of dollars.
But conventional sales make it almost impossible to sell a house that needs major repairs. Many lenders refuse to issue loans for a property that’s damaged. Fortunately, cash buyers don’t have to follow these rules.
That’s why so many homeowners sell their “fixer-uppers” to cash buyers. That way, sellers don’t have to sink time and money into repairs, and they can enjoy a fast closing with less stress.
Incentives for Buyers to Pay Cash
It’s not hard to see the benefits of accepting a cash offer on a house. It’s also not difficult to understand why a home seller might prefer a cash deal: It’s quicker, easier, and with fewer obstacles to maneuver.
But why would a buyer prefer to pay cash for a house?
In most cases, a cash offer is a stronger offer. This holds especially true in a seller’s market — or a market in which there aren’t many homes for sale — when home buyers compete with each other over limited inventory. Buyers who pay with cash hold an advantage over buyers who must obtain financing.
Along with the advantage at the negotiating table, some lenders prefer cash buyers, too. For instance, a lender may hold foreclosed homes or real-estate-owned properties (REO) in their portfolio. Often, the cash offer will win out in the case of multiple bids.
Homebuyers who pay with cash may have access to different types of homes for sale. Homebuyers who use USDA or FHA loans to buy a house are usually restricted to certain types of properties, including homes in certain places or in certain conditions. Cash buyers aren’t bound by these restrictions.
Cash Sales Save Money
Another advantage of buying with cash? Saving money. A conventional home sale involves thousands of dollars in closing costs such as appraisal fees, processing fees, document fees, credit checks, and loan origination fees. Cash sales greatly reduce closing costs for buyers and sellers alike.
Cash buyers also pay less over time. They’re not using a loan to buy the home, so they don’t have to worry about paying interest. Over the years, that interest can add tens of thousands of dollars to the price of a home.
Cash Sales Provide Equity
In addition, cash buyers have instant equity in the home they buy. That offers a sense of security in case a financial issue should ever arise. No mortgage means not being at the mercy of market swings, because that equity is already there.
Faster and Less Stressful
Finally, a cash sale closes quickly and causes less stress. There’s no waiting for the underwriting process, which can take weeks. There’s no anxiety over a less-than-great credit score, and there’s no waiting on tenterhooks for the results of a home appraisal.
Given all these benefits, it’s no surprise that many buyers choose to pay in cash.
Benefits of Accepting a Cash Offer
Cash home sales differ from traditional home sales in several ways. Let’s look at a few.
1. No Appraisal
With a cash sale, no appraisal is necessary. In most traditional sales, the buyer works with a mortgage lender. In order to reduce their financial risk (in case the home buyer forecloses in the future) the lender needs to determine that the house they’re being asked to finance is worth at least the amount of the loan.
In most cases, an appraisal is used to determine the home’s value. If an appraisal comes in low, the mortgage lender may decide they’re not willing to finance the home sale. This is a major cause of home sales falling through.
A cash sale takes the appraisal out of the process. Because there’s no mortgage lender involved, no one requires an appraisal… removing a huge obstacle from the home selling process.
2. Fast Closing
Another difference between cash and traditional sales? Cash sales take less time to close, from start to finish. Again, the mortgage lending process is usually to blame.
Most sales require a mortgage to be underwritten. This lengthy process takes from 30 to 60 days, and a lot can happen during that time. If the buyer’s financial situation changes between pre-approval and loan finalization, the mortgage lender may refuse to offer a loan and the deal may crash and burn. In fact, financial difficulties are the major culprit when it comes to contingent offers falling through.
In contrast, a cash sale isn’t contingent on mortgage underwriting. That means home sellers both reduce their risk of a deal falling through and save time on the sale process.
3. Less Risky
Cash offers tend to be stronger than offers using traditional financing. When presented with multiple options, it just makes sense for sellers to pick the buyer that presents the least risk. Usually, that’s the cash buyer. Often, home sellers choose a cash offer over an offer that will be financed with a mortgage, even is the cash offer is lower.
The seller knows that the deal with close faster, and that means they’ll get paid sooner. When you take the financing out of the picture, there’s less risk of the deal falling through.
4. Reduce Stress
Selling a house the traditional way is stressful. You have to clean, stage, repair, and upgrade. You must find an effective agent, deal with the appraisal and inspection, and keep your home spotless through showings and open houses. And let’s not forget the million and one other things to worry about; will the buyer back out or lose financing? How long will it take to sell?
While there are many reasons you may want (or need) to sell quickly, maybe you simply don’t want to draw out the process. Either way, a quick home sale reduces some of the stress typically associated with selling a home.
5. Solve a Difficult Problem
Do you need to split the equity in your home in a divorce? Do you have to relocate for work sooner than expected? Maybe a fast home sale would avert foreclosure, or allow you to liquidate cash to pay down debt.
Whatever the reason, accepting a cash offer on your house can help you out of a sticky situation.
6. Save on Repairs
In a traditional home sale, the inspection brings attention to necessary repairs. In most cases, the home seller must either pay to fix problems or lower the home’s asking price accordingly.
In a cash sale, you simply sell as-is. You’ll save money on repairs and upgrades… especially given that most don’t even result in a full return on investment. Best of all, you don’t even need to clean or stage.
7. Skip the Marketing and Showings
Finding potential buyers is a lot of work, and showing your home in the best light is both time-consuming and expensive.
Consider open houses and (especially) showings; keeping your home in walk-through-ready condition at all times is difficult. Got a full-time job, kids, or pets? Maintaining a spotless state may feel next to impossible!
With a cash sale, you don’t have to market or show your home.
8. Stop Feeding the Money Pit
Has your house turned into a money pit? Are you tired of sinking your hard-earned paycheck into repair after repair?
Many homeowners feel this way, especially those with older houses. The good news is, you can stop wasting money by accepting a cash offer.
9. Move Quickly
Do you need to move for your job? Are you getting divorced? Are you simply ready to go? Don’t let a sluggish market thwart your plans.
Why wait around for your home to sell? Just sell your home for cash, move out, and move on with your life.
10. Pass on the Inspection
Let’s face it: The inspection and appraisal process is no fun. Discovering all the things “wrong” with your home can be incredibly stressful.
A cash sale lets you avoid this hassle. Cash buyers expect your home to have flaws, allowing you to skip expensive repairs that can slow — or derail — a traditional sale.
11. Eliminate the Risk of a Failed Sale
Speaking of derailed sales, did you know that financial issues are the main cause of home sales falling through?
A cash buyer like HomeGo eliminates that risk. Not only can you avoid inspection contingencies — notorious for letting buyers back out of sales — there’s no risk of financing falling through because HomeGo uses its own funds to buy homes.
12. Avoid the Negotiating Table
Do you enjoy haggling over prices? Find it fun to go back and forth over nit-picky details? Many people find negotiating stressful and unpleasant.
Good news: A cash offer lets you avoid the negotiations completely. Instead, you’ll receive a firm offer. You can accept on the spot and be done.
13. Say No to Piles of Paperwork
Paperwork is yet another not-so-fun home selling activity. The sheer amount of forms to read, initial, and sign can feel overwhelming, and even small mistakes can cost you.
However, a reputable cash buyer will handle the closing and paperwork process for you.
Not all offer this service, though. If you’re working with a cash buyer, be sure to check reviews and references to see how they’ve helped other buyers.
14. Save on Commission Fees
Did you know the average real estate agent fee takes up to 6 percent of your home’s sale price? Selling your house for cash means you skip the Realtor and save the money.
Just be sure to check for hidden fees, as some cash buyers may spring them on you. Fortunately, HomeGo never charges fees, so more money stays in your pocket.
Why is an All-Cash Offer Better?
Sellers love all-cash offers for a number of reasons, but for most, it all boils down to a quicker process that contains fewer uncertainties. Many home sellers may even choose a cash offer over a higher offer that involves conventional or FHA loan financing.
Why? Because a cash offer that includes proof of funds is simply more likely to close, take less time, and involve fewer obstacles.
Let’s look at a few potential stumbling blocks that plague so many conventional home sales, starting with the appraisal. Most lenders require the home in question to undergo appraisal before closing. If the appraisal value comes in under the loan amount, the lender can cancel the loan unless:
- The seller agrees to lower the price, or
- The buyer is willing and able to increase the down payment
Where do appraisal values come from? Usually, an appraiser finds three to six similar properties, known as comparable sales. The appraiser then analyzes the value of these properties, comparing them to the home in question.
If your home has been updated, the appraiser may adjust the value upward. If your home doesn’t have as many features as the comparable sales, the appraiser may adjust your home’s value downward.
The appraisal process can be nerve-racking for buyer and seller alike, especially given that a low appraisal can tank a deal. For the home seller, this means starting the selling procedure all over again.
Rather than go through this stressful, uncertain process, home sellers may choose to embrace one of the many benefits of accepting a cash offer on a house. An all-cash offer completely removes the uncertainty of the appraisal process from the home selling equation.
Unfortunately, the appraisal isn’t the only piece of the home selling process that causes trouble. Even when a home makes it through the appraisal gauntlet, contingencies may throw a wrench into buyers’ best-laid plans.
For example, a potential buyer’s qualifications may not hold up under more intense scrutiny. Problems with financing may arise from matters as simple as a buyer changing jobs and moving to a different occupational field within the past couple of years.
Or maybe the buyer applied for a car loan or experienced identity theft during the home purchasing period.
It just takes one incident for a buyer to be disqualified… but home sellers considering a cash offer don’t have to worry about any of these common issues.
Where Do You Find a Cash Buyer?
Now that you’ve explored the benefits of accepting a cash offer on a house, you’re probably wondering where, exactly, to find a cash buyer. Here are a few types of cash buyers:
- Real estate investors who buy homes, improve them, then sell them (also known as “fix and flip”) or hold them as rental properties
- Homeowners who’ve recently sold their house and are using their sale proceeds to buy a new home
- Retirees who are using their savings to buy a home rather than pay mortgage financing interest and fees
- Well-off buyers who can afford to pay cash
- iBuyers, or instant online buyers that pay cash for homes in certain conditions and in certain locations
- Companies like HomeGo that buy your home for cash directly with no need for repairs, appraisals, or inspections
If you’re considering selling your home, a cash offer can provide a solution. As we’ve seen, cash sales offer benefits from faster closings to lower costs and less stress. If you’re ready to explore the advantages of a cash sale, contact HomeGo to learn more today.