If you’re a homeowner, then the words “cash offer” have probably made you feel nervous, relieved, suspicious… and had you wondering how low that number is going to be before you even see it.
Those feelings are all valid. Cash offers have something of an undeserved reputation that’s had a major impact on how sellers interpret them. But since that reputation has been built both on falsehoods and reality, let’s address both.
What A Cash Offer Actually Is
Let’s start with basics.
A cash offer doesn’t mean someone comes to your door with an attaché case full of hundred dollar bills. It means that the buyer is paying without financing. There’s no lender to work with, no loan application being processed in the background, no financing contingency allowing them to back out between contract and closing.
When you think about it from a seller’s perspective, what that means is huge. A traditional sale is contingent on the buyer’s financing working out between contract and closing. Appraisals, income verifications, debt-to-income ratios, underwriting…everything has to line up before it’s done. Cash offers skip all of that. Which means that they’re far less likely to fall through than a traditional buyer. If an investor makes you an offer in cash, their closing isn’t contingent on anyone else.
The ability to close with certainty is the foundation of everything else a cash offer entails.
Why That Number Looks Like It Does
Here’s where things get sticky for many sellers.
If an investor makes you a cash offer, it’s probably lower than you might expect to get from a traditional listing. That’s true across the board. But it doesn’t mean what you think it means.
We covered this extensively in our last post, but here’s the short version: investors who buy houses in as-is condition are paying for everything that comes with it. The repairs, the uncertainty of what the repairs will uncover, carrying costs while renovations take place, and holding time between buying and whatever they plan to do with the property next.
A purchase agreement only works as well as the contingencies written into it. The more contingencies involved in a sale, the more opportunities there are to renegotiate after inspection or back out of the deal entirely. Cash buyers write fewer contingencies into their agreements…and pay less for that simplicity.
Said differently, the investor doesn’t think your home is worth less than X because it’s falling apart. They’re simply willing to pay less because they’re assuming costs you don’t.
You get peace of mind and speed. The investor assumes the rest.
What “Going Traditional” Really Means
For sellers to fairly weigh their options, they also need to understand the alternative.
Listing traditionally opens the home to the largest number of potential buyers. When conditions are right, that can mean more competition and a higher sale price. But there are hidden parts of that process that aren’t always considered.
The average homebuyer wants a place that’s ready to move into. Is yours? If you have deferred maintenance, outdated upgrades that need replacing, or any level of renovation the pool of buyers who will make you an offer shrinks dramatically. The ones who do will come armed with inspections that lead to repair requests, renegotiations, and price adjustments after the fact.
Buyers who need financing bring uncertainty about appraisals and loan approvals. No matter what happens along the way, you’re still responsible for paying for the house until it closes. Taxes, insurance, and in most cases a mortgage.
There’s absolutely nothing wrong with selling traditionally. Plenty of homes in good condition, with owners who don’t need to sell right away, should do exactly that. But that doesn’t make it an inherently better choice than a cash offer. It’s just a different set of tradeoffs.
What You’re Comparing a Cash Offer To Matters
Here’s the big question I feel like sellers don’t get asked enough:
compared to what?
Two to three weeks sounds like an eternity if you’ve got a cash offer on the table that will close in five. But five weeks looks much different when you’re comparing it to three or four months…especially if you’re still paying mortgages, utilities, and taxes while you’re waiting.
And if accepting a cash offer that’s 5%-10% below your “comps” means you can save yourself two months of mortgage payments and eliminate your chance of closing falling through, then those “lost earnings” might not be so bad. Especially if you can avoid making repairs.
Context matters. Every property, every seller, and every market is going to shift this calculation one way or another. But in my experience, it’s far too often left out of the conversation.
Your offer price isn’t equal to the net result of accepting a cash offer. And the listed price on a traditional sale isn’t what you’ll net if it sells either. When you compare offers, you have to look at both sides of the equation.
What A Cash Offer Isn’t
Helps if we’re clear on what we’re not discussing as well:
First off, a cash offer doesn’t mean your buyer hasn’t researched the home. In fact, most cash offers are made quickly because the buyer has already run their numbers before they ever talk to you. Cash offers close quickly because those buyers aren’t gambling on the chance you accept their offer; they already know it works for them.
A cash offer doesn’t leave you without leverage. Terms, timeline, price, and possession date are all up for negotiation. If you know what you want out of a sale and what you need from your buyer, you can almost always get it.
And a cash offer doesn’t mean you’re just giving your home away. Every seller asks themselves “what if…” when they leave repair costs on the table. But the lost earnings on your sale price can almost always be made up by not repairing. Depends on your situation, but it absolutely should be considered.
What Sellers Should Be Asking
A lot of sellers look at a cash offer and immediately think, “Is this fair?”
Sure. But it’s not the only question you should be asking.
When faced with an offer from an investor, I recommend asking this:
does this allow me to meet my needs better than my other options?
If your house doesn’t need repairs and you’re looking to maximize your sale price (and you don’t need the house sold urgently), then listing traditionally is probably going to serve you better. But if you need certainty, speed, or to avoid dealing with a buyer whose offer is contingent on your house passing inspection…cash may net you less money, but it also gives you more value than a random offer that falls through.
For sellers, cash offers can be an amazing option. Or they can be legitimately skewed against you. Whether an offer is in your best interest depends on the offer… and the seller. When you know the difference between what a cash offer is and what it isn’t, you’ll be in a much better position to decide which side it falls on.