Yes, cash offers can fail. This can happen, for example, if you do a professional home inspection and defects are found, or if there are problems with the title to the property that need to be resolved. A seller can also decline a cash offer if they don't trust the source of the funds. If the home is valued for less than expected, you have the opportunity to shine by bridging the appraisal gap.
Cash buyers don't have the same limitations as mortgage borrowers. Therefore, if a home is valued for less than the agreed purchase price, it will affect the loan-to-value ratio and the contract is likely to change. Sometimes, the buyer pays the difference in cash (covering the appraisal gap), although it is also possible for a seller to lower the price of the home. The latter, of course, hurts the seller and is highly unlikely to happen in a seller's market.
The buyer signs the offer agreement, deposits the guarantee money, and then it is sent to the seller's agent, who presents it to the seller to accept the offer or reject it. If the seller accepts the offer, the seller signs it. Once both sign, it's binding. There is no back and forth.
Everything is handled by the agents. The contract is signed by both parties and is normally binding in a matter of hours. Sometimes, if the buyer is short on money or has strange conditions, the buyer's agent will call the seller's agent to verbally give him the offer for prior consideration before wasting time with paperwork that the seller would reject anyway. By law, all offers must be given to the seller for consideration (even ridiculous ones).
It used to be that about 90% of all purchase contracts were closed, but that number has dropped to only ~ 65% today due to falling buyer financing, poor valuation, buyer falling apart, and home fails inspection contingency. For example, if the lot is smaller than you thought when you made the offer, you might want to renegotiate with the seller. I've never sold a property before, so I haven't really thought about this before, but it makes a lot of sense to go for a cash offer, even if it's not the highest bid. Perhaps the buyer expects funds from the sale of their home, and unfortunately, that doesn't work, or earns less than anticipated.
These are potentially hundreds of thousands of dollars that the buyer must deliver in the form of a bank check or cashier's check at closing. Regardless of who sends the cash offer, you should carefully weigh the pros and cons before accepting it. So, should you make a cash offer on a home? Just because you have the means doesn't necessarily mean it's the right move. With a cash offer on the table, the buying and selling process is a little different than it would be with a mortgage involved.
According to the National Association of Realtors, with fewer properties on the market compared to a year ago, a higher fraction of non-first-time buyers are making cash offers. Other Contingencies A cash offer contains no financial contingency, but that doesn't mean that the offer is contingency free. If you're selling a home, be sure to consider the pros and cons of a cash offer, as well as who the offer is coming from. The cash buyer outperforms the funded buyer because there is less chance that the deal will close and because, in general, a cash buyer can close faster than a funded buyer.