Negotiating a cash home offer gives many buyers an inherent advantage, especially in California's competitive markets, where the proportion of cash buyers is high. Cash offers allow sales to be concluded quickly, 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 you can ask for concessions.
You can also use the results of the home inspection as a bargaining chip, for example. Seller concessions can include anything from a credit for closing costs to certain repairs to the home. This speed, coupled with the additional certainty provided by these offers, can often give cash buyers the upper hand in bid wars, something common in today's short supply market. With these programs, the company makes a cash offer on your behalf and you mortgage the property in a separate transaction without involving the seller.
Finally, 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. 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 bad idea to go without it. Again, buyers who pay cash for these real estate (REO) homes tend to win multiple bid situations.
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. And today, there are even companies that back a cash offer for shoppers without enough savings to do it on their own. More than anything else, cash gives you a lot of bargaining power when you negotiate with the car seller to get the absolute new or used price of the car you want. The ability to negotiate better terms is considered a hidden cash discount because sellers don't advertise a separate list price for cash buyers.
While it's true that all transactions lead to cash in the end, the realities of financing pose obstacles between buyers. If you first need to sell your existing home, “these companies can also contract to purchase your current home, allowing you to present that you will have cash available when it's time to close as a buyer,” says Bruce Ailion, a real estate lawyer and real estate agent. In addition, paying cash can give you the flexibility to eliminate a financial contingency from your offer. Cash buyers must show the seller some form of proof of funds, such as a bank statement or certified financial statement.