Making a Cash Offer on a Home: Everything You Need to Know

January 20, 2022
April 14, 2022

It's hard to miss the headlines. More and more people are buying homes with cash. In fact, In July 2021, the share of homes bought with cash hit 30%. In the past, cash offers were only an option for wealthy buyers who didn't need financing. Today, that's no longer the case. And homebuyers aren't just using cash in competitive markets, they're using it in any scenario where they need more negotiating power.

Our founder and CEO, Tim Heyl, explains: "In the multiple-offer situations we've seen over the last year or so, cash's number-one advantage is that it can beat traditional offers." In fact, cash offers are four times more likely to beat financed bids. "But in less competitive markets, sellers still prefer cash. Why? Because it's a contingency-free offer, which means sellers can be confident that it's going to close without hiccups or surprises."

But "Making a cash offer on a home is the cleanest, most attractive offer possible and benefits both the buyer and the seller," explains Brian Gubernick, our chief real estate officer. Here's why:

Cash offers are less risky

The biggest reason cash offers are more likely to get you what you want is that they carry less risk for the seller. Compared to  traditional offers — which are dependent (or contingent) upon mortgage financing, the sale of an existing home, or an appraisal — cash offers are more certain (To learn more about eliminating contingencies from your offer, read this article.)

According to the November 2021 Confidence Index from the National Association of REALTORS® (NAR), 6% of all purchase agreements fell apart before closing. "Six percent doesn't sound like much," explains Gubernick, "but when you're the seller, it's more risk than you want to tolerate. When you make a cash offer, you're essentially signaling to the seller that the deal is solid. You're not going to back out because you can't get a mortgage, sell your old home fast enough, or tolerate a low appraisal. You're not going to be in that 6%." And that, Gubernick says, is what every seller wants to hear.

Cash offers close faster

Sellers are highly motivated to sell quickly. They want to maximize their equity as soon as possible and minimize the number of open houses and showings. (Of course, those who know better use our Buy before you sell solution so they can move into their new home before they list the old one.)

So put yourself in the seller's shoes. Which offer would you choose: The financed offer that typically takes 30-45 days to close or the cash offer, which can close in as little as two weeks. NAR's November 2021 Confidence Index also found that 24% of real estate contracts had a delayed settlement. "No one wants to hear that closing is delayed," says Gubernick. "And cash makes that less likely to happen."

Cash offers give you negotiating power

The vast majority of offers a seller receives include contingencies. So when you eliminate those contingencies by buying with cash, your offer stands out from the rest, giving you more power. Because buying with cash eliminates those contingencies, cash puts you in control.

"In some markets, that may mean you can buy the same home for less money," explains Gubernick. "In other markets, it gives you more leverage so you can get all of the appliances to convey, command seller credits at closing, or be in a better position to bargain for whatever it is you want."

Where to get your cash

Now that you understand how you (and the seller) benefit from a cash offer, you may be asking where you can get the cash. Until now, making a cash offer was out of reach for most people. Either they didn't have the money, or it wasn't liquid, and taking money out of investments and retirement accounts to buy a home is rarely the right decision.

We offer a better solution. When you work with us, you get to use your agent and our funds to build the best offer. We buy the home you want with our cash. Then you can go ahead and move in. And then, once you finalize your mortgage, you buy back the home from us. "Buying with cash is a win for the buyer and the seller," says Gubernick.

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