Cash Offer on a House. What is it and how does it work?
Summary:
- What is a Cash Offer On a House?
- How to Make a Cash Offer on a House?
- Benefits of Paying Cash.+`-
- Why do Sellers Prefer Cash Offers?
What is a Cash Offer on a House?
When you hear of a cash offer on a house you might envision someone handing you a briefcase full of money. Yet, this is not exactly the case.
A buyer that makes a cash offer suggests that they can purchase the property outright without needing to obtain a mortgage loan. But the most significant differences between a cash offer and an offer backed by a mortgage loan can be found in the associated contingencies.
With a traditional purchase, the finance itself is the most important part of an offer. Although you can (and should) include a pre-qualification or pre-approval letter from a lender with your purchase offer, these funds aren’t guaranteed until the loan is granted. With a cash buyer, verifying proof of funds is different from loan approval and still a critical step you don’t want to miss. Always ask for recent account statements and/or certified proof of funds.
How to Make a Cash Offer on a House?
If you are the buyer, making a cash purchase involves several steps:
Make an all-cash offer on a house you like that’s for sale. An offer should be drafted with the assistance of a real estate agent and/or real estate attorney, according to experts.
Set a price for the purchase. Provide bank statements and a formal endorsement from your bank as evidence of your ability to pay.
When selling a home to a cash buyer, some people choose to forego the inspection or appraisal if both parties agree to this. These become optional for cash buyers, as they are required to obtain funding from a mortgage company during the purchase process.
Both parties will sign the offer/contract of sale assuming there are no concerns following the inspection or appraisal.
There are many cash buyers like Fair Property Buyers that are willing and able to close a deal and pay cash in as little as 24 hours. If this isn’t the case, it’s often a good idea to have a title firm or lawyer to form an escrow account, then place the agreed-upon earnest money deposited into the escrow account.
If earnest money is put down, the rest of your money should be deposited in the escrow account. At closing, the seller will receive this cash, and ownership (represented by a deed) will be transferred to you, represented by a deed.
These sales can close fast, usually within a few days, provided you have the liquid funds on hand to buy a home altogether.
Benefits of Paying Cash
Cash deals usually close quicker and they are much easier for both parties.
The seller doesn’t have to be concerned about a bank turning you down for financing. That may provide you a benefit when trying to buy a house and getting your offer accepted.
1) Quick closing
A cash offer is quicker to complete from start to finish. Also, the entire procedure moves along much more quickly without a mortgage lender. For starters, there is no underwriting procedure, which will save up to a month or two.
2) Less risk
As a seller, financial deals that were promised to you may not work out, leaving you holding onto a home longer than you had planned. On the other hand, a cash offer ensures instant payment. There is the chance the offer might be lower, but the chances that there will be issues brought on by a third party decrease, allowing you to close the deal more quickly. Cash buyers at Fair Property Buyers will always verify funds and close as quickly as possible.
3) No appraisal is required
Traditional house sales involving mortgage lenders entail having your property officially appraised and valued by someone. If a lender determines that the sale cannot be financed based on the appraisal you will be back to the drawing board, negotiating the price and the sale will be delayed.
In a cash sale, the appraisal step of the process is skipped. No mortgage lender means there is no need for an appraisal or inspection.
4) Selling a house “As-is”
With a traditional sale, a house inspection may reveal the need for several—and occasionally pricey—repairs.
Cash deals, on the other hand, are frequently sold “as-is,” which means the buyer has agreed to buy the house as-is without requiring you to make any improvements. Additionally, you can avoid the cleaning and staging processes.
5) Avoid the tedious paperwork and negotiations
When you purchased your home there was undoubtedly a lot of back and forth between you and the seller through the Real Estate agent on the necessary repairs, who would be responsible for the closing costs, etc.
With a cash offer you can avoid going through all of that. Repairs and restoration can be avoided if you are selling “as is,” making closing costs considerably cheaper.
Why do Sellers Prefer Cash Offers?
Cash is king and queen when it comes to purchasing a new property. Sellers often favor cash bids for two main reasons:
For the seller, cash offers are less risky. There are a lot of conditions associated with when you make a typical offer to buy a house. Your offer could be subject to obtaining financing, selling your primary residence, or passing the appraisal. Each contingency raises the possibility that the sale won’t close, which puts the seller in a difficult situation.
Cash offers close more quickly. Most sellers desire a rapid sale. They don’t want to bother with open houses or never-ending showings. Most significantly, they want to withdraw their equity from the house.
This explains why cash offers have a fourfold higher likelihood of winning financed bids. Sellers can be sure that a cash sale will finish without any problems or unexpected events.
Cash home buyers like Fair Property Buyers buy homes directly from sellers, which saves time. This option can be a good choice if you need to sell your home quickly. Although the amount of time it takes to sell your home on your own may vary, working with a cash buyer is a fast process. You can close and have cash in hand from Fair Property Buyers in as little as 3 days, depending on the situation. This allows you to move on from your old house and start fresh without having to wait for months or even years to find a qualified buyer. If you are looking for a fast and easy way to sell your house, then selling to a cash home buyer may be the best option for you.
