Surely the seller receives the full payment from the buyer’s lender either way? I’m confused on why it is sure to get you a much higher chance of getting the house.
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A cash offer does not require bank underwriter approval.
1) Guaranteed to close.
2) Can close faster.
This is why sellers will accept a lower price cash offer vs one requiring a mortgage.
Well for one it means they have the money to purchase immediately (no 30 days etc) closing takes quite a while and during that period the lender can still decide not to back the lendee if anything changes or something isn’t right (it happens way more than you would think) so it can be quite a nuisance. Someone will be able to offer other reasons this is just one easy one I know
A cash buyer isn’t dependent on finalizing their mortgage loan… there’s always a risk a buyer loses their job, has some credit issue that prevents them from getting the loan, rate hikes make payment unaffordable, etc. vs. a cash buyer will close for sure. Also, a cash buyer can usually close more quickly than a borrower since the mortgage underwriting turnaround can be 30-45 days.
In addition to what’s already been said, it means that you don’t have to worry about a contingency on the sale of the buyer’s current home.
Getting paid in cash is instant and risk-free. Going through a lender always leaves at least a small chance that something is gonna go wrong, someone might back out, someone might have lied or misunderstood or miscommunicated, and you’ll end up having to cancel the whole deal, having wasted your time and lost out on other opportunities to sell.
Other answers are all right and spot on with reasons. Just want to mention one more reason that cash buyers can be better than someone getting a mortgage. Many lenders require an appraisal of the house before underwriting the loan and will not loan more than the house appraises for. Just as an example, let’s say you want to buy a house listed at $600k, but the appraisal only comes in at $520k. In that case, the lender will only provide a loan for $520k, so the buyer would need to either come up with the rest of the money, or get the seller to drop the price, or they can back out. And this is one of the conditions that allows them to recoup their contingency fee as well. Meanwhile a cash buyer doesn’t need an appraisal and often doesn’t care if it comes in under.
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Thank you! Very, very few potential sales fall thru due a a prospective buyer getting denied for a mortgage.
Every financial institution will let you know beforehand how much they’ll approve you for.
I bought a house 2 years ago – I was a bit late on the scene. There were 2 prospective buyers upping the ante but neither had had their finance approved. I had the cash, the owner needed to settle quickly (divorce) and I was prepared to waive the “cooling off period”. I saw the place one afternoon and exchanged contracts the next day (at a slightly lower price than the other 2 were offering). That’s what cash can do!
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