Should You Accept a Cash Offer On Your Home?

Got a Cash Offer On Your Home? What to KnowWhen a buyer makes an offer on a home, they often include a clause stating the offer is contingent upon the approval of a mortgage. If the buyer is unable to secure a mortgage for the home, they may cancel the home purchase and keep their deposit. This clause, called the financing contingency, can be a big disadvantage for a home seller.

Cash offers are thought to be better because they don't include a financing contingency. However, there are other factors to consider. This article will explore those other variables. If you're a Collierville home seller, here's what you need to know about cash offers.

For informational purposes only. Always consult with a financial advisor before proceeding with any real estate transaction.

Does the Buyer Have the Cash On Hand?

A cash offer from a buyer does not always mean that the buyer has cash to buy the home in a bank account. Often, cash offers are contingent upon the buyer selling another property. The sale cannot be completed until the first property is sold.

Depending on the circumstances, the buyer's other property could take months or even years to sell. If the buyer is asking for too much, or if the buyer's home is in an undesirable location, this could drag out the purchase process for a long time.

If the first property does not sell for as much as the buyer is anticipating, or if the sale of the home takes a long time, this could make the cash offer less meaningful.

Are There Other Contingencies?

Although a cash buyer will not include a financing contingency in their offer, they will likely include other contingencies that could slow the buying process. These other contingencies include:

  • Appraisal contingency. This contingency would allow the buyer to renegotiate or cancel the purchase if the home appraises for less than the offer.
  • Home inspection contingency. This enables the buyer to renegotiate or cancel the purchase if the home inspection turns up significant problems.
  • Home sale contingency. This means that the purchase of the home is contingent upon the sale of the buyer's current home.

Home sellers who are considering a cash offer should discuss these contingencies with their real estate professional, to help them understand how these contingencies work.

Is the Amount Equal to the Value of the Home?

Sometimes cash buyers make offers that are below the value of the home, or below the value of other offers. This often happens when the buyer is an investor hoping to "fix and flip" the property. In order to make a profit, the investor must offer as little as possible for the property. Knowing that sellers often look for cash offers, they often offer less than other buyers. Cash alone gives them an edge.

Home sellers should take this into consideration when trying to decide whether to accept a cash offer. A good real estate professional can help the seller negotiate a better deal. However, if the buyer will not negotiate, the seller must make a decision.

Work with Your Real Estate Professional

It's important to work with a real estate professional throughout the home purchase process. If you're a seller, contact a real estate professional before listing your home for sale. Your real estate professional can help you sort through the offers on your home, to help you decide which offers are best. If you get an offer that is less than ideal, your real estate professional can help you renegotiate that offer to work better for you.

For informational purposes only. Always consult with a financial advisor before proceeding with any real estate transaction.

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