According to the National Association of Realtors, in March 2021, 23% of home buyers (including real estate investors) financed their purchases with cash. But are cash offers better for home sellers? Well, that depends on the offer and the seller. Read on to learn more.

Who buys with cash?
Cash buyers tend to be concentrated at either extreme of the housing market. On the low end, you will see house flippers and investors buying homes that might not qualify for a mortgage due to condition, price, or both. At the higher end, there will always be buyers who don’t need a mortgage. That may be because they have plenty of equity from a home sale, they received a gift or loan from a family member, or simply because they are wealthy.

Why a cash offer may be better than a financed offer

·       Confidence in the deal going through.
With cash, the buyer either has the money or they don’t — if you’ve verified the proof of funds, you know you’ll be able to close.

·       Faster process.
Even preapproved home buyers must get an actual mortgage approval, then go through underwriting. That can take 45 to 60 days. Closing a cash transaction can take as little as two weeks.

·       Fewer contingencies.
Cash buyers tend to be less likely to request an appraisal, a home inspection, or other contingencies.

·       Simpler closing.
Cash buyers should take it upon themselves to get a title and escrow company and have an experienced buyer’s agent (and possibly a real estate attorney) to ensure paperwork is complete and correct. Still, without a lender involved, there’s much less to review and sign off on to close the deal.

·       No appraisal stress.
Lenders require an appraisal before approving a mortgage, since the property is what secures the loan. When home values are rising rapidly, appraisals based on comparable home sales don’t always keep pace, leaving a gap between what a buyer would be willing to pay and what a lender will agree to finance. With a cash offer — and no appraisal — the home’s value is whatever the buyer is willing to pay.

Why a financed offer may be better than cash
Given all of that, you might assume cash offers always win. But there’s more to making an offer on a house than funding. A few variables to consider:

·       What is better for your timeline.
If you’re in a hurry to unload a vacant home or move into a new one, a speedy closing sounds great. But if you’re trying to buy while selling, you might want some extra time. Compare the proposed closing dates and timelines among offers to see which works best for you.