Negotiating a cash home offer can give buyers an advantage in competitive markets, such as California, where the proportion of cash buyers is high. Cash offers allow for quick sales, benefiting both the buyer and the seller. When your top cash offer gives you leverage, you can choose to bid below the list price or a competing bid, or ask for concessions. You can also use the results of the home inspection as a bargaining chip.
Seller concessions can include anything from a credit for closing costs to certain repairs to the home. This speed, combined with the additional certainty provided by these offers, can often give cash buyers the upper hand in bid wars. In addition, there are companies that back a cash offer for shoppers without enough savings to do it on their own. This gives buyers the ability to negotiate better terms, which is considered a hidden cash discount because sellers don't advertise a separate list price for cash buyers. When you use cash to pay for your home, you don't have a lender that requires you to have homeowners insurance, but it's still a good idea to get it. When making a cash offer, buyers must show the seller some form of proof of funds, such as a bank statement or certified financial statement.
Attorney Bruce Ailion says that “a seller views a cash offer favorably because there is no risk that the buyer will not be able to close the transaction.” Paying cash can also give you the flexibility to eliminate a financial contingency from your offer. However, if you pay in cash, you're sacrificing the potential for a significant tax deduction for home mortgage interest. Even though this doesn't apply to cash buyers, there are still some good reasons they might want an appraisal. Finally, when buying real estate (REO) homes, buyers who pay cash tend to win multiple bid situations.