Why Cash Isn’t Always Best
Very little would happen in the world without credit, but in real estate, just like everywhere else, cash is king. And when you put your house on the market, being told by your agent that you have an offer coming from a cash buyer is very good news, indeed. After all, in theory, a cash offer is a more reliable offer, because there are fewer risks—the buyer has the cash, has no need of a mortgage or other loan, and is ready to deal. What could go wrong? Simple, right? Not necessarily. Let’s start by looking at what the term “cash buyer” might actually mean.
The true cash buyer
The idea may seem appealing but no, a cash buyer will not be handing you a briefcase stuffed with money. The true cash buyer is simply a buyer who can pay for the property without taking out a loan. It’s as simple as that. For transactions involving a mortgage, the offer is usually contingent on approval of the loan—if the bank says no, the deal could fall through, but at the very least, will get a great deal more complicated. And this can happen even when a buyer is preapproved.
Not so for the cash buyer. The cash buyer is making an offer that’s rock solid, no contingencies, no fine print, no ifs, ands or buts. It’s a more attractive offer because, first, there’s less risk of it falling through, and second, with no mortgage to close and no bank to deal with, you’re likely to enjoy a smoother, faster, simpler sale process.
The faux cash buyer
The other kind of cash buyer is a little more complicated. This is a buyer whose offer is not contingent on a loan, but who’s applied for one just the same. In theory, the faux cash buyer is just as reliable and attractive as the true cash buyer—and to be clear, even this kind of cash buyer is preferable to one with a financing contingency—but in reality things can get a little dicey in this situation.
For example, if the buyer doesn’t get the loan on time, it could delay the closing. You might think: Hey, no problem, if the first buyer can’t come through with the money, I’ll move onto another buyer. But remember that by the time the process is that far along, any other buyers you may have had have moved on to the properties. Walking away from your buyer could mean starting the whole process all over.
Having buyers without financing contingencies is a great thing, but be sure that, first, the buyer has been approved for any loans related to the transaction, and that you’re informed of the loan process all along the way.