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Cash Offers are Tempting, But Proceed with Caution

In today’s red-hot real estate market, with inventory low and demand high, it comes as no surprise that real estate professionals and their clients are seeing a best-case scenario play out within just hours of listing — cash offers that eliminate the uncertainty of buyer financing. In a competitive housing market, sellers are finding themselves fielding cash offers like never before as buyers try to avoid bidding wars. 

There are two ends of the spectrum when it comes to cash offers, from low-end buyers looking to flip a property, to wealthy individuals who don’t need a mortgage with plenty of cash in the bank. While buyers are quick to accept cash offers since the stress of financing falling through is eliminated, there are some drawbacks that every seller should consider. While the advantages nearly always outshine the negatives of a cash offer, be aware of the potential pitfalls as well. 

Quick Closing

Once there is a contract of sale in place, many sellers then begin the house hunting process for their new home. For many, the 60 to 90-day timeline from mortgage underwriting to closing is a welcome delay — buying them time to find their next house and have an offer accepted. However, cash offers move much more swiftly, with some closings happening in just two weeks. All your buyer needs to do is provide proof of funds, and the closing moves forward. If you’re a seller who needs to lock-in a buyer and know the final purchase price before placing an offer on your next home, that ultra-short timeline could leave you in limbo between homes.

Leaving Money on the Table

While there is certainly value in a cash offer in terms of ease and reduced stress, sellers should be careful to not undervalue their home simply for a cash offer. Research indicates that on average, sellers accept cash offers that are 11% lower than financed offers. On high value properties, this translates to a significant amount of cash left on the table. The other consideration when it comes to valuing your home for a cash sale is the absence of an appraisal. Since it’s the mortgage lender that requires an appraisal to ensure the financed amount doesn’t exceed the value of the home, that step is skipped with a cash offer. With home values rising at unprecedented speed, sellers should do their homework to understand the current market value of their home before accepting a cash offer that might be significantly less. 

Demanding Buyers

Cash buyers tend to be very inflexible, from providing only a few hours to accept their offer to demanding certain contingencies. They want to move quickly to prevent a seller from entertaining other offers, whether cash or financed. With a cash offer, buyers often feel they have the upper hand in negotiations, and will apply pressure to work within their timeline and meet their demands. 

 Despite the increase in cash offers, it’s still considered a non-traditional way to purchase a home. If a cash offer appeals to you, but is leaving you feeling uneasy, there are safer alternatives to get cash for your home and avoid the stress of dealing with a buyer. Jeff Cook Real Estate can help you determine if a traditional or non-traditional sale is right for you, and if you decide to go the non-traditional route, Jeff Cook Offers can assist in a stress-free way. Their team of real estate professionals can make a fair cash offer on your home with a sales process that offers less hassle and works on your timeline. They’ll simply schedule an appointment with you, you’ll agree on a sale price, and you choose your closing date. For a seller looking to take the stress and uncertainty out of selling their home, Jeff Cook Offers could prove to be the best option.

Discussion

#1 By ICT House Buyers Buyers at 2/9/2022 3:39 AM

I find your blog very easy to read. We are ICT House Buyers, offering property buying offers to buyers and sellers.

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