What is a cash offer in real estate and why consider it?

Selling or Buying a property is one of the most important moments in anybody’s life. It is a huge decision a homeowner takes after many considerations. Buying or selling a home is a daunting task when the demand is high and the supply low or vice versa. But, a cash offer can ease your tension. In general, people desire cash offers more than financed ones. But why? There are many reasons behind this. In this article, we will give you ideas about the sell your house for cash offer and why you should consider it.

What Is an All-Cash Offer on a House?

A cash offer is a kind of sale in which the home buyer offers the home seller the entire cost of the home without involving any mortgage loans or other financing options. It is much easier and quicker than other ways of selling options. Many home sellers and buyers prefer cash sales just to avoid too many contingencies which stand as risks for both the buyers and the sellers.

From the seller's perspective, the philosophy of cash offer is clear, that is: the buyer has bought his house and paid for it. For the sellers, the end result isn't impacted whether the money comes from the seller's own bank account or from a mortgage loan. 

And from the buyers' perspective, they want to buy houses quickly without going into lengthy and costly steps and pay the cash when both parties are agreed.

Who makes cash offers on houses?

Traditional buyers

Traditional buyers are the most common buyers who make cash offers most of the time. Traditional buyers who make cash offers are those who have liquid assets to pay cash. Traditional buyers are individuals who generally purchase homes for living.

iBuyers, investors and direct buyers

iBuyers and direct buyers are also those companies who buy houses with cash. They generally buy those houses without financing and they want to close the deal as early as possible so that they can remodel the houses and make a profit from there.

Why consider cash offers?

Cash offers are great for both buyers and sellers. Let's see why cash offers are great for them:

Why is cash offers favorable for sellers?

There are many reasons why it is great for sellers. Here are some of the reasons:

Less contingencies

Generally, cash buyers waive contingencies more often when they deal for cash offers. Because lenders want you to get a house at a price that a house is actually worth. However, If a cash buyer lessens or waives the contingencies, you will not have to think about what your house is actually worth.

Save money

Generally, cash buyers offer less price by waiving contingencies and buying a house as it is. It will help you to save money. Because, in traditional sales, various related costs are added to your costing bucket which you won’t have to do when you are dealing with a cash buyer. In addition to that, if you hire real estate agents, you have to give them up to 6% commission fee on the sale price. So, when you are dealing with a cash deal, you can also avoid those commission fees.

No appraisal needed

Appraisal is not necessary when you are dealing with a cash sale. Because there is no mortgage lender involved in cash transactions. In traditional sales, buyers do appraisals to determine the value. If the appraisal values are lower than the asking prices, the sales fall through.

Speed of transaction

When you are dealing with a cash buyer, you will be able to sell your house within a few weeks which takes much less time than traditional sales. In traditional sales, you will need 50 to 60 days on average to sell your house.

Less risk

Cash offers are less riskier. Because, when a cash buyer offers an all-cash offer, he may waive appraisal willingly which reduces the risk of falling the sale. Mortgage lenders do the appraisals more often to ensure that they aren’t financing an overvalued property.

Why is cash offers favorable for buyers?

Like sellers, buyers also get many benefits from cash offers.

You can cut closing costs down

In an all-cash offer, you can save money by cutting closing costs. Because you will not have to pay the lenders to originate the loan or review your application.

Lower purchase price

When you are paying cash to buy a home, you can buy a house at a lower purchase price than the listing price. On the other hand, sellers are also willing to sell at a lower cash offer just to avoid lengthy and costly selling processes.

No mortgage interest

When you are offering cash offers, you don't have to go through "monthly mortgage payments" like options. Because, in mortgage payments, you have to pay at high-interest rates.