What are the benefits of a cash offer in real estate? A cash buyer offers multiple benefits over a buyer that is using a traditional mortgage to fund the purchase. Read on to find out why a cash sale might be the best option for you.
1. Much faster closing
First of all a cash buyer has the ability to close much faster than a buyer using a traditional mortgage. This is because cash buyers don’t have to submit a mortgage application, follow a mortgage lender’s process, deal with underwriting and approvals, get an appraisal, etc. Cash buyers can usually close in a few weeks. Why is this a benefit? According to the 2019 Ellie May Origination Insight Report the typical time to close was ~46-49 days in 2019 for purchasers using a traditional mortgage.
2. Cash buyers can buy houses as-is
Second, cash buyers can buy houses in as-is condition. In other words, they can and do buy properties that need a lot of repairs or that are in disrepair. Mortgage lenders will not lend on houses that need many repairs. In turn, a cash buyer may be the only type of buyer able to buy your house if it is in bad condition and needs a lot of repairs. In other words, if you need to sell they may be your only option. Even if the house is not really bad this means that you as a seller won’t have to spend any time, effort or money making any repairs to your house in order to sell it.
3. No mortgage contingencies
Third, with cash buyers there is no mortgage contingency in their offer. Benefit? There is no risk of your sale falling through and you being stuck with no recourse if the home buyer buying with a traditional mortgage doesn’t qualify for said mortgage. Mortgage contingencies give a buyer a clear chance to walk away if they don’t qualify for a mortgage. Not having to deal with this contingency is a good thing for a seller.
4. No appraisal contingencies
Fourth, there is usually no appraisal contingency in their offer. Cash buyers are not at the mercy of getting approved for a traditional mortgage, which requires that the house appraise for a value at least as high as the sales price. Like mortgage contingencies, appraisal contingencies give a buyer a chance to walk away without any obligation if the house doesn’t appraise for the sales price. At the very least a buyer using a mortgage can force you to lower the price to meet the appraised value in order for the mortgage to be approved. Again, not having to deal with this contingency is a good thing for a seller.
Selling to a cash buyer has clear benefits over selling to a traditional buyer using conventional financing. A cash buyer can offer a faster close, which is helpful if you need to close quickly.
Cash buyers also buy your house as-is, which is critically important if you can’t afford to make repairs or if your house is in disrepair. If your house is really bad most conventional lenders won’t lend on it. Lastly, there are usually no contingencies with a cash buyer. This means no mortgage approval contingencies or appraisal contingencies. This gives you more assurance your deal will close.
The information presented in this article is for educational purposes only and should not be considered legal, financial, or as any other type of advice.
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