August 2022
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A Cash Offer Isn’t Always Better—Consider These Things First
Image: Kuprevich / Adobestock

The cash buyer almost always outranks the financed buyer because there is a lower chance of the deal falling through, and typically, a cash buyer can close faster than a financed buyer. These are very attractive benefits, yet there’s more to a home offer than a finance contingency and the closing date. Here are three things you should scrutinize before accepting a cash offer.

1. Other Contingencies 

A cash offer contains no finance contingency, but that doesn’t mean the offer is contingency-free. Most buyers reserve the right to appraise and inspect the property before closing and to withdraw from the contract if the inspection reveals any major repair issues. If an inspection reveals problems, you will have to carry out the repairs or renegotiate the purchase price. For this reason, a cash transaction may not proceed any faster than a mortgage-financed purchase, and there is still a chance the deal will fall through. 

2. The Bottom Line

Some cash buyers, especially investors, make a low cash offer because they are cash buyers. They effectively charge a premium because there is zero risk of the bank refusing the buyer’s loan. This does not represent the best deal for most sellers, especially those who need the sale proceeds to purchase a new home.

3. Weighing Your Options

If you get several offers on your home―and at least one of those offers is cash―a good question to ask is, how risky is the financed offer? The most telling answer to this question comes from the buyers themselves; specifically, the action they have taken toward securing the necessary financing. A financed buyer who holds a quality preapproval letter, offers a good down payment, and has reliably paid a mortgage in the past will likely get a loan. These qualities make their offer as strong as the cash offer, especially if it’s a higher offer. Don’t be swayed by the word “cash”; it’s important to look at the deal holistically.

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