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Should I accept a cash offer for my house?

Published June 27, 2024| minute read

    If you're planning to put your house on the market, you may find yourself fielding a variety of different offers from buyers, including some cash offers. This might have you wondering, "Should I accept a cash offer for my house?”

    As the name suggests, an all-cash offer is an offer from a buyer who's ready to purchase a house without any financing or the need to apply for a mortgage. Typically, they would pay an agreed-upon price for a house with a wire transfer or a check. Let's look at what selling a home for cash involves and examine some specifics of all-cash offers.

    Benefits of accepting an all-cash offer on a house

    All-cash offers have been on the rise in the current landscape, with nearly a third of all residential property purchases made in cash. Some of the benefits of accepting an all-cash offer on a home might include:

    • Possibly faster and easier process: Generally, a home purchase financed with a mortgage involves more paperwork and approvals, which may extend the time needed before closing. On average, it may take around three to five months to buy a house with a loan. However, depending on the lender and customer scenario, timing can vary. By contrast, an all-cash deal could take as little as a couple of weeks.
    • Less risk of the deal falling through due to financing: As a seller, you may not be aware that even if a buyer was preapproved for the mortgage, it doesn’t guarantee they’ll end up qualifying for the loan. Generally, if the buyer proposes an all-cash deal, it likely indicates that they have the funds ready to go. Additionally, sellers could possibly request proof of funds to verify that the potential buyer can afford the property.
    • Fewer contingencies: An all-cash offer allows parties to bypass a mortgage contingency. There's also a higher chance of being able to forgo some other contingencies that lenders usually require for mortgage approval, such as inspection and appraisal contingencies (if the buyer agrees).
    • Possibility to get money quickly: When selling a property for cash, the seller is likely to get cash immediately, which could possibly be helpful in situations such as a job loss or divorce.

    Accepting a cash offer: What to be aware of

    While accepting a cash offer for a house does have its advantages for sellers, it may help to also consider some of the drawbacks that might come with it. For example:

    • Potentially lower price: Buyers who are ready to pay in cash tend to offer less for a property than those who aim to finance a purchase with a loan. This happens because buyers are usually aware that sellers may prefer cash offers for the reasons mentioned above.
    • Rapid selling process: A scenario in which a seller might be inclined to pass on the cash offer is if they're trying to buy a new house while selling. In this situation, a longer process could possibly be helpful, as it may provide more time to find the next home.

    If you’re considering accepting a cash offer, it helps to weigh the pros and cons and talk to a real estate professional to see what works best for their situation.

    Cash offer process, explained

    Generally, the process of selling a house for cash might differ from that in which the buyer finances the purchase with a mortgage. Let's look at some steps a seller might take if they decide to proceed with a cash offer:

    • Evaluating the offer: If a seller receives several offers, including all-cash ones, it may be helpful to thoroughly review each one and evaluate which one best suits their needs. While the sale price is important, there could be other factors worth considering, such as contingencies, the type of buyer you're dealing with and the proposed timeline.
    • Requesting proof of funds: When talking about an all-cash offer, a seller could ask for proof of funds in the form of a bank statement, a certified financial statement or a letter from the buyer's financial institution.
    • Passing the home inspection: Usually, a buyer would want to have a home inspection done to gain better insight into the current state of the house. If their offer included an inspection contingency, they may be able to request additional repairs or negotiate the price based on the inspection's findings.
    • Transferring the title: A title search is an integral part of the home selling process, regardless of the payment method. During this step, a buyer conducts a property title search to ensure there are no liens on the house, and after it’s done, the seller has the legal right to transfer it to the buyer. Customer should consider escrow and either hiring a title company or buyer to hire to ensure closing, transfer of funds and new ownership documents are handled properly.
    • Signing closing documents: On closing day, the parties sign all necessary documents with the help of their agents and attorneys and finalize a deal. After that, the seller should receive the payment, and the property is transferred to its new owner.

    Selling a house requires a fair amount of research and legal paperwork. To increase the chances of the process running smoothly, homeowners may choose to seek the help of an experienced real estate agent and attorney.

    Are there closing costs with a cash offer?

    When buying a house with a loan, buyers would likely have to pay additional closing costs associated with a mortgage. Examples could be private mortgage insurance, loan origination fees and application fees. The exact types of fees and their amount may vary significantly depending on the lender, yet the closing costs are generally higher for buyers financing a purchase with a mortgage.

    Although a cash offer helps buyers save some money on closing costs, it does not eliminate them altogether. Here are some closing costs that would still come with a cash offer:

    • Title insurance
    • Property taxes
    • Escrow fees
    • Processing and filing fees

    In summary

    Accepting an all-cash offer may be a faster and easier way to sell a house. That said, it comes with its own drawbacks, which are essential to consider. If you are thinking of accepting a cash offer, it may help to talk to a professional to discuss all the pros and cons and determine the best course of action in your situation.

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