What is a cash offer?

Buyers who are able to purchase a home with readily available funds will have unique leverage when placing an offer on a home. When faced with a cash offer, sellers have the assurance that the buyer already has the means to purchase the home, which makes their offer more appealing than others.

Making a cash offer means that the buyer is offering to purchase the property outright using readily available funds. This means that they will not need to acquire any home finance before the transfer can go through.

Buyers who make a cash offer do not necessarily have a literal briefcase full of cash (although technically possible). It is more likely that the money is readily available in the form of a liquid bank account, whether this is a standard checking or savings account, a money market account, or even a family trust.

There are multiple reasons why a buyer would prefer to purchase a home with cash. The first of which is the most obvious avoidance of being charged interest on a home loan. A second benefit is that the buyer will have a better chance of having their offer accepted, especially if they are purchasing within a seller’s market where multiple offers are being made on a home. Because lenders are not involved in a cash offer, the process of transfer and registration is also likely to go quicker for those who purchase with cash.

For this reason, sellers who are in a hurry to sell might be willing to accept a lower cash offer over a higher offer pending home finance approval. This is owing to the greater simplicity of the deal which also allows for a greater likelihood that the deal will not fall through.

However, most buyers will struggle to save up enough in readily available capital to be able to afford a cash offer. Additionally, after using all the capital to purchase the home, Goslett warns that buyers might not have any savings left to cover any upgrades to the house or emergency expenses. We would recommend that those who make a cash offer purchase well within their means and leave room in their savings to cover these expenses.

The importance of remembering that each transaction is unique, which makes it helpful to have the experience and guidance of a real estate professional at your side. “Whether you are buying or selling, real estate professionals are there to help you navigate through any uncertainties and complete a successful transaction. Their guidance can prove invaluable in avoiding any mistakes along the way.

Courtesy of PrivateProperty | Adrian Goslett RE/MAX