Do cash buyers have an advantage?

Buyers who are willing to pay cash have an inherent advantage over those who need to borrow, and can even win over the seller at a lower price. Lenders with multiple foreclosures in their portfolios sometimes discount list prices in the hope that properties will attract multiple offers.

Do cash buyers have an advantage?

Buyers who are willing to pay cash have an inherent advantage over those who need to borrow, and can even win over the seller at a lower price. Lenders with multiple foreclosures in their portfolios sometimes discount list prices in the hope that properties will attract multiple offers. Another advantage of buying with cash? Save money. Selling a conventional home involves thousands of dollars in closing costs, such as appraisal fees, processing fees, document fees, credit checks, and loan origination fees.

Cash sales significantly reduce closing costs for buyers and sellers alike. The process for making a cash offer differs slightly from the process of making a traditional mortgage contingent offer. Cash buyers expect their home to fail, allowing you to avoid costly repairs that can delay or fail a traditional sale. Since they are already spending a considerable amount of cash on the home, they are less likely to want a property that needs significant improvements or requires major repairs.

First and foremost, cash buyers don't need to work with a mortgage lender to buy a home. That creates even more competition among homebuyers, raising prices and encouraging non-investors to consider making a cash offer. Cash offers may seem like something only the super-rich can afford, but they are more common than you might think, especially in hot markets, where buyers can take advantage of money from the sale of another home, savings accounts, or gift funds. When home values increase rapidly, appraisals based on comparable home sales don't always keep pace, creating an appraisal gap between what a buyer would be willing to pay and what a lender will agree to finance.

The appraisal process can be stressful for both the buyer and the seller, especially since a low valuation can cause a deal to fail. With cash, the buyer has the money or not. If you've verified proof of funds, you know you'll be able to close. This is especially true in a seller's market or in a market where there aren't many homes for sale when buyers compete with each other for limited inventory.

If you receive a cash offer from a buyer who is more or less a repeat customer, it may be easier than if you are working with a cash buyer for the first time. The advantages and disadvantages of cash offers depend on which side of the closing table you sit on; in other words, sellers and buyers will have different perspectives on potential risks and benefits. Whether you end up accepting a cash offer or opting for a funded offer, Guerrero and Ferrante agree that in a market where you can wait for multiple offers, it makes sense to wait for the right one to arrive. The real difference lies in avoiding the many contingencies that pose risks for both the seller and the buyer.

As a cash buyer, it's worth considering conducting the same risk assessments that a lender would do when instructing your shipping agent to perform the required relevant property searches.