Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money.
Getting ready to sell your home? No matter the listing price, in today’s strong seller’s market, you may find yourself getting at least one cash offer. In March 2021, 23% of home buyers (including real estate investors) financed their purchases with cash, according to the National Association of Realtors. But are cash offers better for home sellers? That depends on the offer — and the seller.
If you're looking to or don't want to deal with contingencies, a cash offer may be ideal for you. But if you might need more time to find a new home or want to be sure you're maximizing your profits, you could be better off with a mortgaged buyer. It really comes down to the details of the offer, not just where the buyer's getting their funds.
Traditionally, cash buyers tend to be concentrated at either extreme of the housing market. On the low end, you'll see house flippers and investors buying homes that might not qualify for a mortgage due to condition, price or both. At the higher end, there will always be buyers who don't need a mortgage. That may be because they have plenty of equity from a home sale, they received a gift or loan from a family member, or simply by virtue of being wealthy.
In the current market, however, more and more average home buyers are paying cash. With housing inventory tight and buyer demand high, paying cash is one tactic some buyers are leveraging in order to win .
"Sellers are absolutely in heaven," says Edgardo Guerrero, a real estate agent with Century 21 Affiliated in Chicago. "For every property, there's 10, 15 buyers."
If you get a cash offer from a buyer who's more or less a regular, it may go more smoothly than if you're working with a first-time cash buyer. Tasks like getting a purchase contract drawn up and securing title insurance are nothing new for them.
The category of regular cash buyers includes real estate investors, house flippers and . iBuyers are companies that pay cash for homes, providing an offer within days, if not hours, and allowing sellers to close in as little as two weeks. Though investors and flippers will seek out listings, you have to take the initiative when .
These buyers generally aren't planning to live in the home. They're likely to , because they expect to make repairs or upgrades as part of their investment. Not mandating repairs is also one way iBuyers ensure speedy transactions. Because they're hoping to profit from buying the house, however, investors may make a lower offer than a buyer who's looking for a place to live.
Guerrero notes that since tax auctions and sales of distressed properties are on pause, real estate investors who would usually pick up properties at auction "have to come to the open market to get homes." That creates even more competition among home buyers, raising prices and incentivizing non-investors to consider making a cash offer.
A home buyer who's buying a house with cash for the first time, whether as a primary residence or a , is more likely planning to actually live in the house. This type of buyer may ask for contingencies, like a . Given that they're already putting out substantial cash on the house, they're less likely to want a property that will need significant upgrades or require major fixes. A property that's safe, solid and move-in ready is a likely expectation for this type of cash buyer.
» MORE: How works
The prospect of a cash offer may have you fantasizing about diving into a pool of money a la Scrooge McDuck, but remember — unless you outright own your home, a good chunk of those funds will be going toward repaying your mortgage. Still, there are plenty of reasons why cash offers appeal to home sellers.
Given all of that, you might assume cash offers always win. But there's more to than funding. A few variables to consider:
Cash buyers can potentially be pushy, assuming that a cash offer is irresistible. "We had an investment property where the buyer came in $5,000 over list price during the ‘coming soon,’ and they said this offer has an expiration of tomorrow evening," says Mike Ferrante, an agent with Century 21 HomeStar in Cleveland.
He talked with the sellers, who decided to hold off rather than taking the cash. "In this case, now there's three offers, and one is considerably higher than what they had offered," Ferrante says.
It's probably pretty clear by now that everyone's circumstances are different and you’ll need to decide what matters most to you. Whether you end up accepting a cash offer or going with a financed offer, Guerrero and Ferrante agree that in a market where you can expect multiple offers, it makes sense to wait for the right one to come along.
"Some people will say 'If I list it for 199 and we get an offer for 215 or 220, we're just gonna take it,'" Guerrero says. He encourages sellers to hold out for "highest and best" offers and to take their time.
A recent listing of his sold for $46,000 over asking price to a cash buyer that came in at "the eleventh hour" when there were already more than a dozen offers on the table. "Had we accepted an offer within 24 hours or even two to three days, we would never have gotten the offers that were coming in," Guerrero says.