Why paying in cash is better when buying homes

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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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12 Answers

Anonymous 0 Comments

#ELI5

You have a bicycle. You want to sell it. Your price is $200.

Jim wants to buy your bicycle. But Jim needs a loan before he can buy it.

Applying for the loan takes time. He has to wait for approval.

Applying for a loan requires Jim to submit lots of paperwork. There’s a lot of back-and-forth between Jim and the lender.

Jim has to submit to a credit check for the loan. If he’s married, his wife has to undergo a credit check too.

At any point in the process, Jim’s loan could fall through, even after acceptance.

Ricky also wants to buy your bicycle. He’s got $200 cash in his hand.

**Who do you sell the bicycle to?**

Anonymous 0 Comments

Buyer flexibility and seller confidence.

One of the biggest challenges when buying/selling a home is chains – linked purchases where successive owners need the money from their sale in order to pay for the place they want (especially if they also need financing to top up their funds to the full amount). If one person drops out for any reason – changes their mind; has a survey done and doesn’t like the findings; can’t arrange mortgage finance; and so on – quite often the whole chain collapses. It can cost time and money, and it’s stressful as heck (it’s apparently one of the most stressful things most people experience, after bereavement). Even when one person merely has tight time constraints, that can cause problems for the whole chain. And chains often need everyone to complete the transaction and move on more or less the same day, and that can cause problems as well. (The fine detail will vary from place to place according to local legislation, but most places are likely to suffer from some variation of the above.)

If you’re a cash buyer, you’re not dependent on any previous sale, and you’re often much less time-constrained as well, and your prospective seller knows that. They can have much more confidence in their sale going through smoothly, and it’s more likely to be on a schedule that suits them. So you’re not only more likely to be accepted as a a purchaser than someone who’s offering the same price but needs to sell their current place and/or arrange financing, but you may well be able to negotiate a better price as well, simply because of that additional peace of mind you bring.

Anonymous 0 Comments

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!

Anonymous 0 Comments

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.

Anonymous 0 Comments

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.

Anonymous 0 Comments

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Anonymous 0 Comments

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.

Anonymous 0 Comments

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.

Anonymous 0 Comments

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.

Anonymous 0 Comments

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