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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A cash sale really only means the buyer has no loan contingency. So, even without a loan commitment and funding, the buyer is obligated to close the sale… but nevertheless the closing cash could come from a loan, there was just no loan contingency in the buyer’s favor.
When it boils down to it, if a bank is loaning you the money, they’re they ones buying the house, not you.
Banks can be incredibly picky about things during the home-buying process. They want to make sure that they’re paying a fair price and the home is in good condition. They will want a 3rd-party appraisal to make sure the home is actually worth what you want to pay. They will require a termite inspection. They will require flood surveys to make sure it’s not in a floodplain. They will require a title search to make sure it actually legally belongs to the seller and there’s no funnybusiness going on with liens or easements or mineral rights or my uncle actually owns 15% of the house.
They will require insurance and the list goes on and on and they can just decide “nope” at any point in the process.
Cash buyer eliminates pretty much all of that. We agree on a price, you give me money, I give you the house, end of transaction.
Sometimes, cash is preferred because banks jerk you around, makes you sign forms, then deny you because of various things. Can take a long time.
Sometimes, cash is preferred because they don’t *want* the bank to get involved and discover things wrong with the house that the new buyer is stuck with and will have to repair (so they won’t be able to sell the house until they fix it. Plus side, deal is done pretty much instantly.
It’s a bad system.
Something folks don’t think about when considering a cash offer vs a financing offer–while you’ll be entitled to keep the deposit, the idea that you’re going to sue the purchasers who balked at a cash offer and be successful (ie see it out and have the purchasers have the cash on hand to satisfy a Court’s judgement) is low if not impossible for the common home vendor.
(YMMV–I’m in Ontario–there is literally a different real estate conveyancing system in every province and every state and they vary broadly)
“Cash” doesn’t mean that the transaction is done using cash. It means that the buyer doesn’t require financing in order to purchase the property. This removes the risk to the seller of having the buyer’s financing fall through before the closing.
I feel like this question is specifically about the word cash? When you buy a house with ‘cash’ it’s not using paper notes, it just means “I have the money, I don’t need mortgage”, the money is there ready to go with no mortgage agreement necessary.
I always felt like it’s this:
Sellers: House is going for 400k, we have offers on the table.
Buyer: will give you 350k in this suitcase.
Sellers: We’ll take it, but the paperwork will list house as 200k (you know for taxes also assuming sellers purchased for less than 200k).
Buyer: ok, you have a deal.
One thing I haven’t seen mentioned :
When you sell a house, you negotiate a price with the buyer. If they use a bank, the bank gets to appraise the house and decide how much they will lend. If their appraiser decides it isn’t worth what you agreed to, all of a sudden you have to take less from the buyer or find another whose bank is willing to lend them more.
Cash is king. I once lost a bid on a house that was $25k higher than the accepted offer – which was all cash. It’s a direct transaction between buyer and seller – less complicated, faster to close, and no worries about bank requirements and appraisals. Inspections can still be an issue but you’d have that with a financed transaction as well. Bottom line: fewer ways the sale can go south, leaving the seller to start all over again.
Despite every answer here being right – when our house was listed, cash buyers were the worst because they were primadonnas and basically wasted our time. Our agent confirmed cash buyers are often worse to work with because they think they can get anything they want because they’re a cash buyer. Especially first time homeowners who are cash buyers – because that is mom and dads money, not theirs – so that’s the kind of people you’re dealing with.
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