Why do home sellers prefer a “cash” buyer? Wouldn’t they get the same amount of $ as a check from the bank if the buyer has a home loan?
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This must be an american thing.
In Norway you bring whats called a financial proof, meaning you already talked to the bank and have it all fixed beforehand
“Cash” is still a cashier’s check from the bank. They don’t give you a suitcase full of 10s and 20s.
As somebody who has bought and sold many homes , I can tell you that 50% of the escrows that fall out are due to the buyer not being able to get the loan for the house they thought they could afford. and cash usually means a quick escrow close and money in your pocket.
but in today’s market with multiple offers, unless you need to get out fast it’s better to qualify the buyers, Make sure they have the money and demand 50% of the deposit pass through after 21-day due diligence, that way they’re invested.
A cash buyer can close more quickly and is guaranteed to have the money needed to complete the purchase without hiccups. A buyer needing financing could run into issues getting a loan, and even if they don’t it can take 4-6 weeks to close.
Cash means faster sale. I bypassed this by getting pre aprroved. Bank gave me paperwork telling sellers i am approved for a mortgage so financing is available.
Another advantage to cash price in a hot market like FL beach places is the rapid recent appreciation that often exceeds appraisal. Cash buyers don’t care. They don’t do an appraisal or inspection and want a quick close.
Music to sellers ears
My wife and I went to buy our house with great credit, a pre-approved loan, and a solid down payment. Then the bank’s initial appraisal came back almost $10k less than our offer. At that point, neither we nor the seller could negotiate. Any cash we had was committed to our down payment and the bank wouldn’t budge. The buyer had to either accept less money or cancel the sale. For a bit, it looked like they were going to walk away and my wife and I would be back to house hunting.
Cash offers aren’t subject to that. There’s no chance of a loan falling through. There’s no chance of an appraisal knocking a chunk off the final price. There’s significantly less paperwork and lawyers and headaches.
It’s part of why homeownership is so inaccessible to first-time homebuyers. If you just sold a home, the equity will significantly lower the cost of your next mortgage or even give you enough money to buy the house outright (especially true for people moving from expensive to more moderately priced markets). If you’re renting, you have no equity and a significantly less impressive down payment even if you’ve been able to set aside money.
Cash sales close faster, to the tune of 10-15 days sooner so the seller gets cash in 15-20 days instead of 30.
Before the bank loans out money to someone, they want to make sure the asset being purchased is actually worth the money they are lending out. If the borrower can’t pay, the bank will want to sell the house to recoup the loan money. So giving a borrower $500k for a house appraised at $400k wouldn’t be smart. In this market, house prices are increasing at a faster rate than appraisal values. So this is a risk the seller might face, where the market says the house is worth $500k but the appraisal says it is $450. With cash, there is no appraisal. The seller has no risk of the deal falling apart due to appraisal issues. The buyer just ponies up $500k.
I got a cash buyer a couple years ago when I sold my house. There are a lot of what’s called “closing costs” associated with these deals. It’s a bunch of fees and stuff from the banks and whatnot. Traditionally the seller is expected to cover these. When the buyer can pay cash you don’t have to deal with those things. I made something like an extra $5,000 profit just from avoiding closing costs.
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