There are plenty of reasons why cash offers appeal to home sellers.
- Confidence in the deal going through. With cash, the buyer either has the money or they don’t — if you’ve verified the proof of funds, you know you’ll be able to close. Though data from the National Association of Realtors suggests that most sales close as expected — as of April 2021, only 5% of contracts were terminated — some sellers want a greater level of certainty. The same report shows that a closing being delayed is much more common, affecting 22% of transactions over the previous three months.
- Faster process. Even preapproved home buyers have to get an actual mortgage approval, then go through underwriting. That can take 45 to 60 days. Closing a cash transaction can take as little as two weeks.
- Fewer contingencies. Cash buyers tend to be less likely to request an appraisal, a home inspection or other contingencies.
- Simpler closing. Cash buyers should take it upon themselves to get a title and escrow company, and have an experienced buyer’s agent (and possibly a real estate attorney) to ensure paperwork is complete and correct. Still, without a lender involved, there’s much less to review and sign off on to close the deal.
- No appraisal stress. Lenders require an appraisal before approving a mortgage, since the property is what secures the loan. When home values are rising 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. With a cash offer — and no appraisal — the home’s value is whatever the buyer is willing to pay.