Trying to sell your home in a competitive real estate market can be daunting. So many homeowners are looking for ways to make money without the process taking forever. Enter cash-offer home sales. Quick closings. The usual home sale involves a buyer, a mortgage—and all the time that mortgage approval takes (not to mention all the ways it can go wrong). A cash offer? Because the buyer isn’t waiting for approval (or stalling while looking for a better deal), the deal development time can be cut from 1-2 months to 1-2 weeks. What does that mean for you, the seller? Your timeline probably just got a lot tighter. If you need to move and get settled (or pay bills) yesterday, the peace of mind alone may be more than worth it. Reduction of the infamous “financing may fall through” risk. In a similar vein to our last point, what happens to regular deals (aka non-cash deals, for those playing at home)? They fail. A lot. And why is that? Because the person being sold the house can’t afford the down payment, can’t obtain loan pre-approval, can’t keep a loan, etc. A cash buyer isn’t a lender who can deny them a loan at the last minute. It’s extra money they have lying around somewhere. What-what! Their offer is just that—an offer, not a “possible offer provided the tens of hoops I usually make people jump through get jumped through. The sale of ‘as-is’ properties. If you have a property, it has value—regardless of its condition. No need to paint a shed—or pay for painting supplies (if we’re being honest). This could be crucial, especially if you can’t physically travel to the house—because of work orders, travel restrictions, stay-at-home mandates … you get my point—to fix it up (plan the renovations, find a contractor, pay for the contractor, etc.) or clean it out (of garbage, your crazy cousin … whatever).
Understanding Cash Offers
In real estate, one option is to make a “cash offer”. This is pretty much what it sounds like – you get to avoid the “fun” of a bank loan approval process and the many places that this can go awry or be delayed. This is an especially useful technique in a real estate market that has lots of-tight competition. There may be a situation where there is more than one offer on a property. For a seller, a cash offer absolutely looks like a safe offer to accept, and a potential way to speed up the process of selling a house. There aren’t any contingencies for the buyer to finalize a bank loan to cover the transaction. There’s certainly less stress, and less time to wonder what to do to sell a house quicker than this. If you need to sell your house fast, for whatever reason, then we would encourage you to place some sort of bonus (ie – attractiveness) on cash offers. Less miscommunication, misunderstanding, potential trouble, and parties/people involved = more clarity and transparency, which are usually good things for everyone. At a minimum, negotiation is streamlined.
Faster Closings
Cash offers can materially reduce the cycle time (i.e., time to money). When selling to a cash buyer, the transaction will bypass all dating and long-lead-time items associated with financing (e.g., loan approval, appraisal) to materially reduce cycle time and increase certainty (certainty to close is often under-represented by real estate agents). If the sale is “clean,” even when working with an initial offer somewhat lower than other bidders (further below), a cash buyer can close in as little as a couple of days or a week (especially if they pull title early), although it can take a couple of weeks for the title binder and final settlement statements. A “dirty” title may or may not create more holdup problems when trying to clear encumbrances before the title company will issue a bind to insure (at least, without clouds on the policy, as noted). For those selling, cutting two to five weeks (or sometimes more with financed offers) off the sale calendar can mean driving cycle time below about 30 calendar days when selling ‘by owner.’
No Financing Fall-Through Risk
In real estate transactions, one of the significant areas of concern—and subsequent transaction complications—is financing. A loan denial can result from any number of things, such as buyer income instability, credit issues, etc. Further complications related to financing can occur when an appraisal comes in at a value less than the contract price (in response, most lender underwriters will reject the loan). All of these issues necessarily require time to resolve, which means that, for sellers, not only is the sale uncertain, but additional time on the market, carrying costs, and potentially lost buyers are either likely or certain to be additional costs. The advantage of cash is simple: limited complications. When you receive a cash offer, you can have a fair degree of certainty that the property is as good as sold. Further, most cash transactions will close very quickly, which means that the uncertain and precarious process of waiting for a buyer’s underwriter to complete the tasks associated with approving a loan and conducting a home appraisal is simply avoided. Another advantage to receiving a cash offer is most apparent when you know someone who initially contracted to sell to a buyer through a loan. That loan, which was likely “pre-approved” before anyone began the whole process, could very possibly fall through (despite indicators to the contrary). If it did, the seller might then have to return to square one, with all the associated problems that the previous buyer had when trying to get the loan. Meanwhile, an earlier cash buyer is probably ensconced in the property, enjoying his new memories of a new seller. In the end, the decision to weigh cash offers against financed offers could change a seller’s experience—and the course of the selling journey—significantly. Owners who require the cash designation can trade financing risks for a smoother sales experience and a shorter trip to the closing date overall. Of course, gaining needed peace of mind in the selling process is something that most would fall over themselves to achieve. After all, certainty of time is always a win when it comes to doing real estate.
“As-Is” Sales
An as-is sale is a term used in real estate to describe a property that’s sold without any further input from the seller. For homeowners who don’t have the resources or interest to invest in renovations prior to putting the house on the market, the as-is approach can get the house in their rearview mirror a lot quicker due to the reduction of steps. There aren’t permits to pull or contractors to manage, and both of those things can get out of hand rather quickly. Cash buyers are a big proponent of as-is sales because terms that follow a buyer seeking a loan to buy a home often have higher stipulations. A cash buyer does not necessarily come without contingencies, but they are able to make business moves faster because they don’t need to go through a bank to secure the funds to buy the home. Their cash offer is what plays into the as-is sale because they commonly accept the home in its current condition with the expectation to cover repairs—whatever they may be—after purchase. The homeowner’s as-is sale helps them avoid some of the uncertainties there are to avoid when selling a home. They don’t have to worry about supervised renovations to satisfy a buyer’s needs, and they might not have to deal with inspections, which would cause problems for the home in its as-is condition. This approach to selling a house among the traditional buyer market redefines the term as something closer to a down-pricer, where the sitewide audience is preselected based on the idea of the purchase. Sellers don’t have to bother with repairs, and buyers get a chance to buy a property that they can design themselves. This move would go along with the modern real estate era’s theme of convenience and speed. Both the buyer and the seller can move on with their lives quickly.
Cash offers provide many unique advantages that can make the process of selling a home more palatable. They can create much quicker timeframes for move-out as some of the most time-consuming aspects of selling a home lie within the negotiations carried out by the buyer’s lending company. It’s not out of the ordinary for regular sales to take at least a month or two to close due to the need for financing negotiation. Cash offers typically have a much quicker back and forth, potentially saving the homeowner precious time as they try to transition to the next phase of life—whatever that may be. What’s more, the risk for the homeowner involved with potentially financing falling through disappears entirely. The most nervous part of the transaction for any seller (if the buyer is not paying in cash) is waiting for the lender of the buyer to say yes or no. If they don’t have the money now, you REALLY want to know whether or not they will very soon. If that deal falls through, that makes for a tough blow to take and a sad loss of time that just passed that was spent betting on the wrong horse. The majority of “repairs needed” in these soon to be sold homes could be completed (or not completed!) 100% by the first homeowner. After all, the first homeowner has the say in the home’s transaction, so if it’s the second homeowner (the buyer) who has future plans for this home to be refurbished—why should/does the first owner need to pay money out of their own pocket to turn this into a reality?? You don’t become a homeowner to take flack you don’t need. That is why homeowners should seriously consider cash offers when selling their homes. The benefits of faster closings, reduced risk of financing issues, and the ability to sell as-is make cash transactions an appealing option. If you are interested in selling your business and want more information or assistance, there are places you can go.
Related posts:
- Understanding Cash Home Sale
- How All Cash Process Works
- Guide to Selling your House for Cash
- How to Choose Reputable Cash Offer