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Why a Cash Offer Is Better When Buying a House

November 19, 2021

4 MINUTE READ

For many home buyers, especially first-time ones, navigating a hot real estate market can be intimidating and daunting. When housing inventory is low, it creates a hyper-competitive environment — leading to bidding wars and sellers seeking out offers with the most favorable terms.

While it’s true that all transactions lead to cash for the seller in the end, one way to stand out as a buyer is by making a cash offer. But if the seller gets paid in the end, regardless, why are cash offers better than financed ones? Let’s dive in and take a closer look at how a cash offer can help you stay competitive and learn some of the benefits associated with it.

What is a cash offer and what are its benefits?

As it becomes increasingly challenging to save up enough money to pay for a home outright, it’s understandable that buyers will seek out financing to facilitate the purchase of a home. However, while it may only seem possible for the ultra-wealthy, some buyers do make cash offers when buying a home. Cash offers are actually more common than you might think — especially in hot real estate markets where a buyer may be able to leverage the funds from the sale of another home, savings, or utilize alternative financing solutions.

But why would a buyer choose to utilize a cash offer? There are a number of benefits, including:

  • Faster closing. Sellers seek to close as fast as possible. They love cash offers and will take them over contingency offers 9 times out of 10. 
  • More negotiating power. If you have the ability to close faster as a cash buyer, you may have the upper hand in negotiating, especially if competition is high.
  • Improved chances of bid acceptance. A cash offer can give a seller more confidence in your offer, boosting your chances of winning the bid.

Why do sellers like cash offers?

Even if your offer isn’t the highest one on the table, some sellers may still choose a cash offer over others backed by a home loan, simply because a cash offer (with proof of funds) will face fewer stumbling blocks and hurdles, and is more likely to close.

There are a number of steps that must be taken when paying for a home with traditional mortgage financing. Lenders require a home appraisal before closing, and will only lend the amount that the home is worth. If the appraisal comes back lower than the sales price, the buyer will be responsible for covering the difference, or must otherwise negotiate with the seller to lower the price for the sale to go through. By making a cash offer, this step can be bypassed — making these types of offers especially attractive to sellers.

Even if they are fully qualified for a mortgage loan, buyers can be held up by a number of different contingencies. For instance, if a buyer wasn’t employed by the same employer for the past 2 years, they may be denied financing. Other circumstances may also derail the sale, such as if their financial situation or credit profile changed before closing due to purchasing a car, or even if they were a victim of identity theft. If a buyer is bringing a cash offer to the table, all of this can be avoided.

The bottom line

Cash offers can increase the odds of winning a home by 4X and often help buyers close under asking price, up to 8% lower. This is especially true in competitive real estate markets such as California. Reali Cash Offer gives you the edge to increase your chances of securing the home you want. How does Reali Cash Offer work?

  1. Get pre-approved. Get pre-approved through Reali Loans and find out how much you’re qualified to borrow.
  2. Win your home. Reali makes an all-cash offer on the home you love. This means you’re more likely to win — and at a lower price!
  3. Close the deal. Once approved and escrow is closed, you can move in. Then, we’ll help you purchase the home from us at the original purchase price, regardless of market conditions or changes.

Whatever your homeownership goals, Reali has a smart solution to help you get there without breaking a sweat. Want to learn more? Contact us today.

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