In almost every scenario, a cash offer is preferable to a seller and strengthens the negotiating position of the buyer. Although all transactions result in the same outcome, a sold property, financing often places obstacles between buyers and sellers during the process. Therefore, sellers naturally favor buyers who face the fewest obstacles.
Why Sellers Want Cash
It is not uncommon to see a seller choose a cash offer higher-priced offers with conventional or FHA loan financing. This is because the seller knows that a cash buyer with proof of funds faces fewer obstacles than other offers and is more likely to close in a timely fashion. When working with a buyer with conventional financing, the transaction is dependent on the appraised value being approved. If the appraised value is less than the asking price the contract will fall through unless the seller reduces the price or the buyer increases the down payment. However, a cash buyer is not obligated to the appraised value and is less likely to face any other obstacles. Additionally, cash sales also take less time to close. A cash buyer does not need to wait 30-45 days to close if they are not obtaining a loan. Once the home inspection and other contingencies have been satisfied, the closing can take place in as little as seven days.
Cash Buyer Incentives
There are benefits to being a cash buyer other than negotiating strength. Paying for a home with cash eliminates a mortgage payment each month, and therefore, the equity in the home provides a sense of security if financial emergencies arise. While market fluctuations can impact the value of a home, owners without a mortgage still have 100% equity in whatever that market value is.
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