Cash offers on houses in real estate are a real thing. In fact, estimates for cash offers on houses in real estate range from 20% to as high as 57%. So who makes Cash offers on houses? That’s exactly what we cover in this quick article.
Don’t know what cash offers are? Read our article that covers exactly what a cash offer is. Also, check out how cash offers change the buying process vs. traditional offers.
So who exactly makes cash offers on houses?
Although anyone has the ability to make a cash offer (if they have the funds) there are a few types of buyers who make cash offers. We can call these buyers the “usual suspects.” In general, cash buyers are real estate investors. These investors can be companies (home buying companies) or individual investors.
Less often, homeowners who plan to live in the property might make a cash offer.
We discuss each of these categories of cash buyers below.
Real estate investors: why they frequently make cash offers on houses
Real estate investors include house buying companies and individual investors. They may purchase Real estate to flip or to hold as rental properties. They could also buy properties to redevelop the land they are on.
Investors frequently use cash offers for a few reasons.
First, cash offers are used as a way to purchase real estate for a discount vs. market price. Cash deals offer many benefits to a seller, which sellers may desire, even if they receive a lower sales price.
Second, cash is used to purchase real estate that wouldn’t qualify for traditional mortgages. This might be because of the property’s condition. It might also be because of other issues with the property, such as title issues.
Last, cash deal close significantly faster than a sale using a mortgage for funding. Because sellers value speed of closing this is a benefit for the seller. Investors also want speed of closing so they can make a return on the property.
Homeowners & why they may make a cash offer on a house
Homeowners are those looking to purchase a property as a primary residence. They will live in the property after purchase vs. using it as a Real estate investment.
These buyers make up a much smaller portion of cash buyers, but they do exist.
They may make a cash offer vs. using traditional funding for several reasons. These include the following:
- They may not qualify for a traditional mortgage because they are self-employed, do not have a history of steady work history, etc.
- Mortgages are expensive, and a hassle, some buyers would prefer NOT to take a mortgage if they have the cash
- They have and would rather use cash vs. taking on more debt
The thing to note about cash homeowners are that they are more similar to traditional buyers. Here’s how:
- They’re more likely to use a realtor than a Real estate investor, so you will most likely still have to pay full realtor commissions
- Closing costs will be split like in a traditional sale (investors typically cover all closing costs)
- They are less likely to buy a property in as-is condition like an investor would
- Like traditional buyers, they will expect a certain-level of condition and ask for concessions for repairs, etc.
So that’s pretty much the heart of it. Cash buyers can come in different forms, but the largest group of cash buyers are typically Real estate investors. These buyers use cash offers on houses to offer the seller several benefits, such as speed of closing and buying as-is. These benefits allow the investors to either buy at a discount or get their offer accepted. There are also homeowners who make cash offers on houses, but as we learned, these are far less frequent.