6 Benefits of Accepting a Cash Offer on a House

Reviewed by: Brandon Brown

If you’re ready to sell, get ready to receive at least one cash offer for your house. 

Buyers know that one of the most powerful ways to show their commitment to a sale (and stand out as a high-confidence buyer) is to make a cash offer. ¹Home sellers, alike, also know that there are many benefits when it comes to selling a house to a cash buyer. But, should you jump at the chance to accept a cash offer?

In this article, we’ll explore the benefits of accepting a cash offer on house sales. We’ll also discuss why buyers are more likely to offer cash than ever before and explain how a cash deal can shorten your sale timeline, reduce your front-end workload and costs, and more. 

All About Cash Offers

Before we discuss the benefits of selling a house for cash, let’s break down the specifics of a cash offer. 

Instead of seeking pre-approval for a mortgage, awaiting inspection and appraisal results, and patiently enduring the underwriting process (which can sometimes take sixty days or more), a seller simply offers to purchase a property in cold, hard cash. ²Cash sales are often completed via cashier’s checks or wire transfers, and sellers receive the entire sum on closing day. 

There are a few reasons why a buyer might make a cash offer:

• They’re seeking a stable investment for sizable cash reserves.

• They’ve recently sold their last home, and want to use the proceeds to buy their next home in cash. 

• They’re purchasing a second home and want to avoid property insurance or underwriting debacles. 

• They have the cash to forgo paying mortgage interest and other fees associated with mortgage loans.

• They want to stand out as a buyer in a seller-flooded market.

• They want to use it as a bargaining chip in negotiating a cash offer on a home for a lower purchase price. 

While not every cash home buyer will cite one of these reasons, they all have one thing in common—they have the cash to purchase a home, and they’re ready to buy. 

 

Benefits of Accepting a Cash Offer

In the current market, you’re very likely to encounter at least one cash offer, and you might be inclined to accept one compared to a loan offer for one of the following reasons. 

#1 Faster Sale Timelines

The typical process for purchasing a home using a mortgage lender can be quite lengthy. Mortgage buyers must endure all of the following steps before getting the keys to their new digs:

1. Completing the mortgage pre-approval process, which includes income verification, credit checks, and other document collection. A pre-approval often determines how much a buyer can spend. 

2. Making a formal offer on their dream home with their realtor or buyer’s agent. 

3. Hiring a home inspector to completely survey the property for damages, potential hazards, pests, and appliance operation. 

4. Purchasing a survey of the property to establish legal boundaries. 

5. Seeking an appraisal, which determines how much a mortgage lender will provide to the buyer. If an appraisal comes in below the home sale price, and the seller won’t reduce their price to the appraisal value, buyers must either pay the remainder of the price in cash or back out of the sale.³

6. Securing homeowners insurance for the property, which can be a hassle when buying older homes. Insurers are unlikely to underwrite policies for homes with old roofs, in flood zones, or with existing structural vulnerabilities (like moisture damage). 

7. Signing all of the lender’s required forms on closing day. 

While buyers can complete some of these steps simultaneously, they all require time. One of the most significant benefits of cash home buyers’ interest in your property is the potential for a truncated timeline. 

Cash buyers can skip nearly every step above, and most simply opt to purchase their own inspection and survey after making an offer. Instead of waiting multiple months to complete the sale of your home, you can complete a cash offer in just a few weeks. Not only does an all cash offer benefit both parties, but the processes of accepting an all cash offer vs financing as the seller can help narrow down the options when multiple offers are given. 

#2 Waiving Inspection Contingencies

After the buyer’s home inspection is complete, their lender reviews the report to determine which outstanding items in the inspection need to be repaired or replaced before they can issue a loan—these items are called inspection contingencies.

Inspection contingencies can often put buyers and sellers at an impasse:

• If a buyer doesn’t want to invest any further money into the property before selling, a potential buyer could back out of a sale if their lender refuses to approve a loan for the property.

• If a buyer doesn’t agree with a seller’s reduced price to account for the buyer’s future investment in repairs, the seller could reject the offer and move on to the next one. 

Since cash offers don’t require approval by a mortgage lender, sellers are more likely to achieve an “as-is” sale, meaning that they won’t need to invest any further in repairs, equipment replacement, or renovations to the property before closing. 

 

#3 No Appraisals Needed

Avoiding the possibility of an appraisal gap during your sale process is one of the many benefits of cash offers on house sales. Like inspections, cash buyers can forgo property appraisal before closing, since their decision to meet a sale price is their prerogative. Sellers benefit from forgoing an appraisal for a variety of reasons:

• They avoid the potential conflicts that can arise when a property appraises below the sale price. 

• They don’t need to pay for the appraisal, which they sometimes do on the seller’s behalf as a show of good faith. 

• They have more control over the sale price and avoid “appraisal gaps” in high-velocity markets. 

Appraisal gaps describe the margin between the appraised price and the sale price, but they’re particularly important to watch for in sellers’ markets. Despite appraisers determining fair market value for a property, markets with low inventories typically feature higher prices than fair market value due to simple supply and demand. 

#4 More Confidence in Closing

As we’ve illustrated in previous sections, working with a home buyer requires numerous stages—pre-approval, inspections, surveys, appraisals, and insurance verification. All of these steps present opportunities for a sale to fall through since a mortgage lender could take issue with any of the respective reports and refuse to approve a buyer’s loan. 

Entertaining a cash offer gives you more confidence that the sale will close. Cash buyers either have the money to invest in your property or they don’t, and while they can certainly purchase inspections, appraisals, and other due diligence efforts if they wish, buyers are more likely to spend their money on the commodity in which they’re investing—a new home. 

Especially for cash buyers looking for a new property after the sale of their primary residence, time can be of the essence, and the combination of their cash reserves and their urgent demand for housing can give sellers more confidence that they’ll hand over the keys to a cash offerer. Not only is there added confidence in closing with an all cash offer, but time can also be saved for the home seller and buyer. So, exactly how fast can you close on a house with cash? It can vary by case, but the process can take anywhere from days to months quicker than with a mortgage loan. 

#5 Lower Closing Costs

When sellers choose to pay some (or all) closing costs associated with the sale of their property, these fees can add up. While sellers don’t always pay a buyer’s closing costs, some do as a show of good faith. Typical closing costs for a mortgage buyer include:

• Loan origination fees

• Mortgage broker fees

• Title searches

• Up-front property taxes (as required by the property’s jurisdiction)

• Up-front HOA fees, if applicable

• Attorney fees (in states that require a real estate attorney for all property sales)

• Closing and title agent fees

Sellers accepting a cash offer don’t have to consider paying loan-related closing costs or splitting them with the seller (which is more common in buyers’ markets) and depending on the negotiations, they can even avoid up-front property taxes and HOA fees. If they agree to a lower price for a cash offer, they can do so in exchange for the seller paying these fees themselves. 

Cash offers give sellers unique opportunities to haggle over closing costs, which could potentially result in further sale profits. 

#6 Saving Money on Front-End Repairs 

If a seller opts to accept cash offers only, they can avoid one of the most stressful parts of the real estate process—trying to increase their values as much as possible via repairs and renovations before putting their home on the market. 

Since cash buyers don’t have to meet lenders’ requirements, they’re more likely to purchase “fixer-uppers” for flipping, rental opportunities, or simply a stable investment. In turn, cash-only sellers can avoid paying for any more changes to the property than they already have, knowing that the average cash buyer will expect to invest in repairs.

While some cash buyers might ask sellers to complete repairs before closing, sellers are under less of an obligation to agree, since a lender isn’t calling the shots. Instead, they could reduce the sale price to accommodate the buyers’ future investment, or simply consider a different offer. 

Get a Cash Offer and Save Time with FlipSplit

The advantages of a cash offer on a house are persuasive—sellers who accept a cash offer can make a larger profit, spend less time awaiting the closing day, and walk away from a quick sale with plenty of cash in their pockets. 

At FlipSplit, we buy houses in cash. And by that, we’re taking the cash offer to a whole new level. We’ll pay you fair market value, in cash, when we purchase your home. But, after we renovate and flip the property, you’ll receive a portion of the proceeds that exceed our profit benchmarks. In a seller’s market, it doesn’t get any better than that. 

From deferred rental properties to 1031 exchanges, we buy houses in San Diego, Riverside, and many other areas in Southern California. Partner with FlipSplit to get the benefits of a full renovation and a cash sale without lifting a finger. Let us do the heavy lifting while you walk away with the cash!

 

 

Sources: 

1. Forbes. Experts Predict What the Housing Market Will Look Like in 2022. https://www.forbes.com/sites/brendarichardson/2021/12/13/experts-predict-what-the-housing-market-will-look-like-in-2022/?sh=45bc54183942 
2. The Washington Post. How Does an “All-Cash” Offer Work When Buying a Home? https://www.washingtonpost.com/business/2021/07/14/how-does-an-all-cash-offer-work-when-buying-home/ 
3. Rocket Mortgage. Home Appraisal Impact On Selling Price And Mortgage Amount. https://www.rocketmortgage.com/learn/does-house-have-to-appraise-for-selling-price-or-mortgage-amount