The Difference Between Cash Offers & Financed Offers
What’s the difference between a cash offer and a financed offer? There is no black-and-white answer. We judge each offer by its own merit, and the bottom line is that once a transaction closes escrow, the seller gets their money regardless of how it got there. There are many more details inside each offer that we have to review and explain because certain terms in a cash offer can make it less desirable than a financed offer (e.g., contingencies or timelines, etc.).
Cash offers get the benefit of the doubt in this market, where we’re seeing multiple-offer situations and prices being bid upward. This brings up the possibility that a home might not appraise for its purchase price, but with a cash offer sellers don’t have to worry about that because there is no appraisal. A cash offer can also potentially close quicker than a financed offer because loans need time to process, and that timeline varies depending on the loan.
However, buyers with cash offers can sometimes ask sellers to take care of multiple things and neglect to write ‘clean offers.’ By this I mean the offer is not written cleanly, with standard closing costs and no repair requests. I don’t encourage waiving home inspections at all—for buyers or sellers.
When working with a seller, I always explain why a buyer’s home inspection benefits them. If there’s something in the home they’re not aware of, they don’t want that to be a problem down the road. It’s far less liability for sellers when buyers ask for a home inspection.
In a different market, there are other things buyers can ask for; for example, they can ask the seller not to pay for the home warranty. Sellers can also gauge a buyer’s motivation by seeing how their offer is written. I always prepare a net sheet for my seller clients with all of their offers to give them a bottom-line estimate of what they’ll take home after the transaction closes. In our current market, even with financed offers that require appraisals, a lot of buyers are offering to pay more than the appraised value, so that nullifies the primary benefit of cash offers.
If you have questions about this or any real estate topic, don’t hesitate to reach out to us, we'd love to hear from you.
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