So, should you put in a cash offer on a house? Just because you have the means doesn’t necessarily mean it’s the right move. Though there can be advantages to making an all-cash bid, there can be downsides too.
Here are some pros and cons you should keep in mind as you make your decision:
Pros of making a cash offer:
- They give sellers more confidence
- They can offer a faster closing period
- Your credit score doesn’t factor into the process
- You don’t need a home appraisal
- You can save money over time (no interest payments)
- You reduce the paperwork and documentation required
Cons of making a cash offer:
- It takes a significant amount of money
- You’ll limit your liquidity and tie up your wealth in one, hard-to-move asset
- You won’t be able to use mortgage-related tax deductions
You may also want to take into account the overall competitiveness of the market — and the exact house you’re vying for. If the market’s hot and there are lots of other interested buyers, a cash offer may help you jump to the front of the line.
Cash offer considerations if you’re selling a house
If you’re selling a house, you’ll probably encounter a cash offer or two along the way — especially if you’re in an affluent market or a place that’s attractive to investors.
Generally, these are the types of buyers who will offer cash:
- Investors looking to fix and flip properties or buy them and hold them as rentals
- Retirees tapping their savings to avoid mortgage financing costs
- Previous homeowners using their sale proceeds to purchase a new property
- Wealthy buyers who can afford to put down large amounts of cash
- iBuying companies that buy your home directly
Pros of accepting a cash offer:
- There is no risk of buyer financing fall-through
- The closing process is usually faster
- There typically won’t be an appraisal
- You might avoid some contingencies
Cons of accepting a cash offer:
- It might be lower than other offers
- The buyer usually isn’t vetted as thoroughly
If you do sell to an all-cash buyer, it’s important to understand the pros and cons and ensure you’re making the best decision for your situation.
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