Here’s how cash offers differ from financed offers.
When your home is on the market, it’s not uncommon to have a buyer present you with a cash offer, meaning an offer that’s not contingent on a mortgage. There are five main things to know about cash offers as they relate to financed offers:
1. Regardless of which offer you receive, it all becomes cash at the closing table. Whether the buyer brings the money to closing or a mortgage company does it, it’s all cash to you.
2. Cash offers typically don’t have an appraisal contingency. I say typically because buyers can always request an appraisal contingency. Most cash offers, however, don’t have them. In today’s market—with home prices on the rise—that can be a huge advantage.
3. A cash offer doesn’t involve a mortgage. In other words, the buyer doesn’t have to go through the mortgage process. With a financed offer, we always request a pre-approval letter from the buyer upfront to prove that they talked to a lender and have been pre-approved. However, things can still pop up during the buying process. The buyer could lose their job, for example, and no longer be approved for their mortgage. A cash offer removes these hurdles right away.
“Whether the buyer brings the money to closing or a mortgage company does it, it’s all cash to you.”
4. Regardless of which offer you receive, your net proceeds are essentially the same. A lot of other things in the contract will affect your net proceeds far more than what type of offer you have. While a cash offer sounds great, it doesn’t add any more money to your bottom line than a financed offer.
5. Both offers require proof that the buyer can complete the transaction. With a financed offer, they’ll have to provide a pre-approval letter. With a cash offer, they’ll have to provide a letter from their bank showing that they have the necessary funds in their account to close the deal.
As always, if you have questions about this or any real estate topic, don’t hesitate to reach out to me. I’m happy to help.