If you’re in a large metropolitan area like San Francisco, New York, or LA, you’re probably well aware how insane the real estate market is. This insanity involves a large number of buyers/investors that make offers with all cash. In my daily practice, it’s normal to have offers from not one, but several all cash buyers. Let me pose a question that seems to have an obvious answer. Should you always accept an all cash offer when selling your home?
So you’re initial answer will most likely be “Yes”, “Absolutely, without a doubt!”, “Most definitely, and where do I sign?”. There’s the obvious advantage of not having a loan to deal with. That means one less contingency to deal with. Also, it shows that the buyer is serious about the purchase, and more than likely has the means to close the transaction. An all cash offer makes a seller feel very “warm and cozy”.
As a home seller your ultimate goal is to get and accept the best offer presented to you. In 2013, 98% of home sellers received multiple offers. Only 23% of these sellers took an all cash offer.
To get the best offer as a home seller you’re going to need to analyze each aspect of an offer, and then compare it against the other offers. If you’re presented with multiple offers, have your agent break each offer down based on the following terms:
1. Offer Price
2. Financing Terms (all cash, loan, down payment)
3. Time Needed To Close Escrow/Transaction
4. What Are The Contingencies and What Are The Timeframes For Them.
5. Will This Be An Investment Property, Or Will The Buyer Move Into The Home.
Once you have a summary of all the offers in this format, you can start analyzing the offers based upon what is important to you.
Looking For The Most Money
If this is your main motivation, you’re not going to automatically accept the all cash offer if it wasn’t the highest bid. Remember, most home buyers are not in a place to buy a home without a loan. If you’re considering an offer that has a loan, make sure your agent determines they are truly qualified buyers. One of the best ways is to have them have a quality conversation with the person handling the prospective buyer’s financing. To the best of their ability, the listing agent should have a conversation that allows them to have a good idea on whether that buyer can close on their loan, and in the timeframe they outline in the offer.
Looking For The Easiest & Quickest Close
As a home seller, you may be in the position where you want to sell you home quickly and with as little hassle as possible. This is truly where the all cash buyer has the advantage. All cash offers means no loan or appraisal contingencies. That means less hoops to jump through, and a much quicker close. Also be aware that more than likely there will still be an inspection contingency. Make sure you’re aware if the buyer has put this in their offer, and what the timeframe is.
So, the question is should you always accept the all cash offer. The answer should align with your main motivations for selling, and how the all cash offer stacks up with the other offers. The key is to stack up all the offers, and see which one best meets your selling requirements. An all cash offer is great, but may not always be the one for you.