The Pros & Cons of a Cash Offer

I realize what you may be thinking…”Can there really be any cons associated with a cash offer?”  Of course, as a seller, cash offers sound great and often times they are.  The thought of not having to worry about your buyer qualifying for financing and in many cases, not worrying whether or not your house will appraise for the sales price, is indeed attractive.

Let me be clear, in most cases cash offers are generally a good thing.  However, there can potentially be a disadvantage for a seller. Often times, an “all cash buyer” may offer a seller less than what a seller would consider if it were an offer with financing (a loan) involved.  The cash buyer may be thinking, “Because I am a cash buyer, I am going to offer less because the seller doesn’t have to worry about me qualifying for a loan.”  Although that is a benefit to a seller, the point is whether a buyer is paying “cash” or getting financing to buy, the bottom line (the amount of money you get at closing) to you, as the seller, doesn’t really change.

If you sell your home for $300,000 (signed contract price), the net to you at closing will be the same whether the buyer pays cash or has a home loan involved.  In other words, assuming a seller has equity in the home, the escrow officer is going to treat the $300,000 the same, no matter if the buyer brought all $300,000 in “cash” (usually in the form of a bank wire or a cashier’s check) to closing or the buyer has a home loan that will cover the majority of the purchase.  You will walk out of closing with a cashier’s check or wire with the same amount, no matter if the buyer paid cash or got a loan to buy your home.

I realize they say, “cash is king” and in certain scenarios it can be, but if you have two offers you are deciding on with one being cash and the other with a home loan, unless they are the same price, don’t be so quick to jump on the cash offer.  If the buyer with a loan involved is pre-approved, have your agent call the lender and ask pointed questions about how solid of a buyer they are and what the lender’s confidence level is about the buyer closing the deal.  Have your agent explain to the lender that there is another offer that is cash and that you want to know how solid the home loan buyer is.

If the buyer with a loan is legit (pre approved by a reputable lender) and the offer is better than the cash offer, you might want to take (or counter back) the offer with a loan.  Often times an offer with a loan involved can be stronger than the ever-so enticing cash offer. Of course there are clear scenarios where a cash offer just makes sense.  You need the cash fast.  A traditional lender won’t approve financing due to some funky stuff going on with the house (no traditional power source, no access other than by boat/plane, etc.).  You and the buyer are afraid your house may not comp out at the sales price (when that happens, a lender will get involved and make things trickier).

Again, to be clear cash offers can be great and come with certain advantages that every seller must consider, but as long as your buyer with financing is solid (pre-approved), it really shouldn’t matter what the source of funding for the home is.  In other words, “Cash is cash either way for a seller.”

As always, thanks for reading and I hope this article was helpful to you.

Mark Phillips of Hill Country Flat Fee Realty serves the communities of Boerne, Fair Oaks Ranch, Fredericksburg, Kerrville, Comfort, New Braunfels, Bulverde/Spring Branch and parts of San Antonio. We charge a flat listing fee and are a full service real estate firm. This saves our sellers thousands of dollars every transaction.