Rather, a buyer who makes an all-cash offer has enough liquid funds to cover the full price upfront. Instead of financing the purchase with a mortgage loan, the buyer will simply pay you directly, just as if they were buying anything else. These offers have become increasingly common in today's hot housing market.
A cash offer in real estate simply means that the buyer does not finance the purchase with a mortgage. Typically, the buyer has the full sale amount in their bank account and purchases the house with a check or wire transfer.
Yes, companies that buy houses for cash in California or cash house buyers are legitimate and operate legally nationwide. 🚨 Cash for Houses Scams: Remember to inspect how the cash company operates before you sign any real estate contract. A legitimate home buyer will never ask you to pay cash!
This isn't always true, but nonetheless, this myth tends to scare off buyers who need financing from even trying to compete. However, I can tell you from personal experience: It is entirely possible to beat an all-cash offer, even if you have a mortgage and other strikes against you.
For sellers, the biggest perk of a cash offer is the surety it comes with — particularly in a volatile rate environment. Mortgaged buyers just come with more risk than cash-backed ones. Namely, they should have finance contingencies in their contracts, which allow them to back out if their loan doesn't come through.
Offering 1% to 4% below asking may not seem like a lot of savings when you're spending hundreds of thousands of dollars, but the reduced price will make your mortgage payments less every month. You may want to offer below 5% when you're paying with cash or when the market is more balanced.
The rise of all-cash home purchases
There are two reasons for that. One, many would-be buyers are being priced out of the market by the steep rates. Which leads to two: For wealthier individuals who have plenty of money on hand, it makes more sense to pay in full and avoid interest altogether.
Not enough money for closing
Since cash sales are typically directly between the homeowner and homebuyer, no realtor fees are involved. This can help the buyer save more, but they must still factor in those closing costs. If they don't, there is a chance they won't have enough to close on the sale.
Ask the buyer to provide proof of ability to purchase.
The first thing you want to do as a seller is confirm that the cash buyer actually has the funds available to purchase your home. Without cash on hand, there's no cash deal. Ask the buyer to provide a copy of their recent bank account statements.
In a legit cash offer, no money should be exchanged before the sale has closed. This ensures that both parties are safe and do not lose any money during the process. If someone is too eager to send you money or even ask you for money, this is a sign that this might be a scam.
While buying a house with physical cash is generally a bad idea, there are alternatives if you have the money to pay for a house outright. Initiating a wire transfer from your bank account to the seller's is probably the safest and easiest route.
Counter-offer pros and cons for buyers
The major benefit of a counter-offer for buyers is the potential to secure the home for less money and on better terms, always a good thing. However, if you really want the house, it's not a great idea to go back and forth too many times with counter-offers.
You can offer whatever you like, no matter how you're paying. If a seller is motivated to sell fast, they may be more inclined to accept a lower offer if it is all-cash. On the other hand, if it's a hot listing with multiple offers, they may not accept a low offer even if it's in cash.
Cash buyers will often, but not always, offer below the asking price or market value of the home. This is seen by many as a 'cash buyer discount'. Many sellers will see this lower offer as an acceptable 'payment' in return for the quicker and more secure house sale that usually comes with cash house buyers.
A seller might believe they can get more money through other methods and decline an all-cash option. They may also be unwilling to go below their asking price if the market is strong in their area, even though it involves faster transactions with no financing contingencies.
Sellers typically prefer cash offers because they greatly reduce the risk that the sale will stall or fall through as a result of an issue with the lender and because cash sales tend to be much speedier than traditional sales.
Partially thanks to high mortgage rates, the percentage of homebuyers who pay cash has risen. As of September 2023, according to Redfin, 34.1% of U.S. home purchases were made in cash. This is up from 29.5% in September 2022, when mortgage rates were lower.
If you buy a house with $100,000 cash, do you have to explain where the cash came from? No. It's as simple as that.
Pros. Sellers often prefer all-cash offers over buyers with mortgage financing. You won't have monthly payments or interest fees to worry about. The absence of costs like mortgage origination fees or lender's title insurance makes closing cheaper.
20% Below Asking
Dropping an offer this low is justified if the home needs extensive repairs to bring it up to code or make it livable. If the property has problems like roof damage, plumbing and electrical issues or foundation problems, it may be reasonable to offer 20% below the asking price.
Probably not a good idea to go in with a lowball offer $50,000 below asking price. A whole year on the market, with price reductions? Go ahead and roll the dice. The longer a house has been on the market, the less of an upper hand the seller has in negotiation.”
For example, let's say you see similar homes being sold for $10,000 to $15,000 less than the asking price of your potential home. If you're in a buyer's market, it's probably safe to make an offer $10,000 below the asking price.