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.
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.
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.
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.
In an all-cash offer, the buyer can negotiate to reduce or waive some of the contingencies to make the deal more attractive to the seller. In some cases, the seller may be unwilling or unable to make repairs or renovations to the property before the sale.
No, lowballing an offer isn't considered rude when cash home buying; it's actually expected and a common tactic used by many buyers. However, you should always remain respectful in your negotiations with the seller as to avoid any misunderstandings or potential hurt feelings.
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.
Can you offer less than market value with an all-cash offer? 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.
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.”
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.
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.
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.
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.
In a buyer's market, you may be able to go 10% or 20% below the home's asking price — especially if you're paying cash or the home is in bad condition. Some agents recommend never offering less than 25% below asking.
Cash offers aren't only better for sellers, but they also give buyers an advantage as well. “Cash is king. If you have cash, you're just gonna end up getting a better deal,” says Saad. Especially in hot markets where more and more buyers are making cash offers, sometimes not having cash can be a huge disadvantage.
Key takeaways
A homebuyer who makes a cash offer intends to pay in full, with no mortgage or other type of financing. Cash deals are more appealing to sellers than financed deals, because they close faster and are less risky.
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.
So long as the seller is not bound by a sales contract, the seller may be able to change the asking price.
By strict definition, a lowball offer is one that is significantly below market value. In practice, an offer is considered "lowball" if it is significantly below a seller's asking price.