A cash offer may not always be the ‘highest and the best’ one to accept

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Published Date 9/10/2021

Cash is king. Cold, hard cash. Cash on the barrelhead. The adages about paper dollars go on and on, and in these days of frenzied multiple bids, all cash offers are not uncommon when selling your home.

Sellers have their reasons for being attracted to all cash offers, including a quicker sale, and less risk because of the lack of a mortgage contingency attached to the offer. But what might be different about the process of selling your house for cash? And why would buyers offer it instead of seeking a traditional transaction?

Redfin’s Alison Bentley explores the reasons. “The number of cash offers you may receive can depend on the local housing market, your home’s condition, or if you seek out a cash offer online. Keep in mind that depending on the type of homebuyer bidding with cash, their offer may come in lower than a buyer with a mortgage. ”

Cash offers are common among several types of buyers. The first are those who want their offer to stand out among any others you might receive, more common in a market like the one we are seeing today, with a lack of available inventory causing multiple offers. Perhaps the cash buyers are very liquid financially or already sold other properties to prepare themselves to make this purchase. House flippers are known for cash offers as well, with the goal of buying your home as-is, fixing it up, and typically re-selling it for a larger profit. Like “cash for homes” companies, house flippers may offer less than what your home is worth. Bentley notes, “Many house flippers follow the 70% rule, meaning that they may not offer you more than 70% of your home’s after-repair value (ARV).”

An iBuyer (or instant buyer) is a real estate company that buys your home directly. They make their offer using a home valuation tool based on the information you provide and recently sold properties in the area. iBuyers are not unlike large employers relocating their employees, guaranteeing them a certain percentage of the market value if their home doesn’t sell fast enough. Other types of iBuyers may charge convenience fees for selling your home fast, so your final payout may be less than the initial offer amount, according to Bentley.

And then there is the real estate investor who pays cash — someone looking to turn your house into an investment. Be aware that with this type of cash offer from any non-US citizen may not be the quick close you’d hoped for, as the closing process is more complex.

Selling your home for cash is appealing if it’s the best offer, a quick closing, an impending relocation, certain contingencies are waived, or if you have an investment, rental or inherited property that needs to be unloaded quickly. In cases where sellers need cash for a life emergency, cash offers can be godsends. While the idea of no appraisal or mortgage contingency may be attractive, however, there may be drawbacks to accepting an all-cash offer, according to Bentley. “As with any home sale, there’s a risk of fraud. If a buyer or company is offering cash, make sure to do your research to verify the buyer is real or that the company exists.” She goes on to say that a cash offer isn’t finalized until you’ve signed the contract and that — just like a non-cash offer — there may still be some negotiations for repairs, depleting the amount you expected before the transaction is complete.

MarketWatch’s Kate Wood also warns, “Cash buyers can potentially be pushy, assuming that a cash offer is irresistible,” she says, citing an example where a buyer came in with an offer over asking price but tied to an expiration date. Consulting with their agent the sellers decided to hold off rather than taking the cash. With cash buyers notorious for their “take it or leave it” quotes, a homeowner who accepts a cash offer closes the door on competing bidders. Most Realtors will encourage their sellers to hold out for “highest and best” offers and to take their time.

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