If you're looking to sell your house quickly or don't want to deal with contingencies, a cash offer may be ideal for you. But if you need more time to find a new home or want to make sure that you're maximizing your profits, you'd be better off with a mortgaged buyer. It all comes down to the details of the offer, not just where the buyer gets their funds. Paying for a home with cash eliminates the need to pay interest on the loan and any closing costs.
Lenders don't charge mortgage origination fees, appraisal fees or other fees to evaluate buyers, says Robert Semrad, senior partner and founder of the Chicago-based bankruptcy law firm DebtStoppers. Why is a cash offer for a seller better? One of the main reasons is the amount of time and effort they save during the closing process. Working with lenders involves a lot of additional paperwork and hoops. Things get much easier when lenders don't participate, especially at closing time.
Now, if a buyer pays for everything in cash, they can choose not to pay the appraisal. They may decide that they are willing to pay more for the house than it is currently worth because they expect the value of the property to continue to rise. Again, this makes cash buyers less risky for sellers. For sellers, the biggest advantage of a cash offer is the guarantee it offers, especially in an environment of volatile rates.
Mortgaged buyers are simply more at risk than those backed by cash. In other words, they should include financial contingencies in their contracts, which allow them to turn back if their loan is not fulfilled. A homebuyer who buys a home with cash for the first time, either as a primary residence or as a second home, is more likely to plan to actually live in the house. A cash offer occurs when the buyer has enough liquid assets (i.e., cash or anything that can be easily converted into cash) available to buy a home in its entirety.
