By admin1
All cash offer pros and cons for sellers
Pro: Less risk and uncertainty
The hurdles attached to obtaining financing (third-party appraisal, underwriting delays) are all solved with the mighty all-cash offer. NAR reports that about 6% of purchase contracts encounter delayed settlements due to appraisal issues alone.
“Cash sales are quicker and less stressful, quite frankly, because you don’t have to worry about the appraisal or the mortgage company having any hiccups throughout the process,” Saad says.
A traditional home sale to a mortgage buyer seems safe because it’s the most common type of residential real estate transaction. However, it inherently comes with a number of risks. If the buyer loses their job or their mortgage falls through for some reason (such as if the house doesn’t appraise), then the deal could fall apart. That’s not an issue with all cash.
And there’s also the risk that your buyer will find additional repairs they want to be completed after they obtain their home inspection. Though this is possible with all-cash buyers, it’s less likely.
When you accept an all-cash offer, either the market is hot enough that the buyer won’t dare risk the sale by asking for inspection concessions, or a savvy investor understands the home is being sold as-is.
Pro: Goodbye (to at least some) contingencies
An all-cash sale lets you say good riddance to a lot of contingency stress associated with a mortgage-backed sale.
You’re not going to have to deal with a financing contingency, which lets a buyer back out if they cannot finalize their mortgage. The absence of a mortgage also means that your all-cash buyer probably won’t need an appraisal contingency.
“An appraisal is a requirement that banks have before granting a loan on a property. So buyers paying with cash or getting a hard money loan, which functions as cash in this capacity, don’t need to have an appraisal on the house,” explains Flowers’ business partner, Damian Barton.
If your cash buyer still opts to get an inspection during due diligence, the process will typically be a lot less taxing on the seller. The buyer won’t be obtaining an inspection to satisfy any mortgage requirements, and they likely won’t be using it to nickel-and-dime you.
Finally, the buyer probably won’t need to use the home sale contingency (a contingency that lets the buyer back out if their current home doesn’t sell within a specified timeframe) because an investor’s purchase isn’t dependent on the sale of another property.
Pro: Faster and more flexible closing
One benefit to accepting an all-cash offer is having more control of the home sale timeline because you aren’t at the mercy of the buyer’s lender’s schedule.
“If your buyer is getting a mortgage on a house, the timeline can vary,” Barton says. In the current market, it takes the average financed homebuyer 41 days to close on a purchase loan. “But the timeline with a cash buyer is a lot more flexible,” Barton says.
“Cash sales usually close within about a week, but if you need more time, a cash buyer can extend that at closing out for 30 or 60 days, or even longer depending on what the seller’s needs are,” Barton adds.
A fast, flexible close isn’t just convenient; it can also save you money.
“A quick close that doesn’t require 30 to 45 days to finalize also saves the seller money, because they won’t need to pay the mortgage and other housing expenses on the property for an extra month or more,” advises Flowers.
When you’re selling a house for cash, you’ll still need escrow services and a title search. But since there’s no lender involved, you may have more control to shop around for affordable escrow services. And if you’re selling to an experienced all-cash investor, you may not even need to do that.
“Oftentimes, cash buyers are willing to cover the title and escrow costs for the seller,” Flowers says. “This is because cash buyers are often investors who have an agreement with the title and escrow company that allows them a discount that’s called an investor or a builder rate.”
Con: Cash may be lower than other offers
Typically, the sales price for most cash sales is going to be lower than what you’d get from a mortgage-backed buyer. Some cash buyers, like flippers, may offer substantially less than market value.
“In general, if someone’s going to pay all cash for your house, you’re going to have to give up something in return, which may impact what you’re going to net on the sale price,” Barton says.
And even if it turns out that you’ll net less than you would with a traditional home sale, don’t forget to factor in less tangible benefits. An all-cash sale comes with the convenience of a quick close, as well as the fact that you can forgo the appraisal and possibly the inspection.
“When there are multiple offers, I often advise my clients to take the cash offer even if it isn’t the highest offer because of all the other benefits,” Saad says.
Con: You may feel rushed
Because cash transactions are so quick, you may feel overly rushed as the seller. If you aren’t prepared to move out within one to two weeks, you may need to be careful when accepting an aggressive cash offer.
Additionally, if you are selling the home to turn around and purchase another, you may get into a position where timing the two transactions is difficult, leaving you without a home for a couple of weeks. Sometimes, you can arrange with the buyer special terms to rent back your home after it closes, but that won’t always be an option.
