Is a Cash Offer King? Part 2: The Cons

Is a Cash Offer King? Part 2: The Cons

There are many benefits to an all cash offer, but there are also drawbacks in the process you need to be aware of. In the first part of this blog series, we discussed the benefits of a cash offer, now we’ll discuss some of the possible drawbacks.

You’ll Likely Have to Move Immediately

One benefit of a cash offer can also be a drawback for a seller. The process happens very quickly. Once a buyer owns your property outright, they’ll be less likely to allow a rent-back provision. Buyers who have a new mortgage payment, but are not yet ready to move may be more inclined to let you rent back the property by paying their mortgage for a month or so. Cash buyers tend to be investors who want to flip the property or immediately make repairs and move renters in for a price that earns them money. If allowed a rent-back, you may be shocked at what you’re asked to pay, or you may have a buyer who puts pressure on you to move out of their investment property as quickly as possible.

More Requests for Repairs

Due to the simplicity of a cash offer and the possible waiving of inspections, the buyer sometimes feels they have enough leverage to get the seller to make more repairs. An all cash buyer will often be low on liquidity. Having to make repairs after purchase will be less attractive for them than someone who is financed and has more cash for repairs.

Offer is Usually Lower

This is the largest deterrent for sellers accepting cash offers. If your primary concern is getting the absolute most for your home, then an all-cash offer might not be the best option. Most cash offers come from investors, and investors buy homes in order to resell or rent them. For this reason, they’re just looking at your property to make a profit. Therefore, paying top dollar for your property would not be in the investor’s best interest. Because the buyer is offering all cash, they may also feel they deserve a lower price tag. However, whether you close with someone who is borrowing from a bank or paying in cash, you still get your money. It would be wiser to choose the buyer with contingencies at the highest offer, instead of selling to an investor at lower all cash price.

Higher Chance of Fraud

If you’re dealing with a known, reputable company, then fraud isn’t as much of a concern. However, if you’re selling to the person who sent you a postcard in the mail, make sure they have the cash that they are offering. Ask to see a bank statement or a “proof of funds” letter from their bank.

Conclusion

Between these two blogs, you as a seller have some food for thought in considering whether a cash offer is best for you. However, this is just one part of the process of selling your home. We would like to help you with our expertise. Contact us at 949-392-6400, so we can guide you through all the difficult questions that may arise.