Disclaimer: This article is meant for educational purposes only and is not intended to be construed as financial, tax, or legal advice. HomeLight always encourages you to reach out to an advisor regarding your own situation.
“Cash is King” is an old real estate saying that makes people think of luxury and endless possibilities. It makes them think of jeweled crowns, velvet robes, and gold coins falling from the sky. The truth may not be quite as dramatic, and while having enough cash to buy a house outright doesn’t get rid of all the problems that come with it, it does make the market feel more like the proverbial “oyster.”
If you have that much cash on hand, or burning a hole in your pocket, you may be wondering why you should even work with a Realtor. What does the process look like when you don’t have one?
Making a cash offer on a house can be an attractive option for buyers in today’s competitive housing market. With mortgage rates rising all-cash deals are becoming more appealing to sellers looking for a quick and smooth sale.
But if you’re going to make an all-cash offer, do you really need to hire a real estate agent? Here’s what cash buyers should know.
Why Cash Offers Are Appealing to Sellers
Cash offers have some key advantages from a seller’s perspective
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Speed – Cash sales can close much faster, often within a matter of days or weeks, because there’s no mortgage lender involved. This appeals to sellers who want to move quickly.
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Certainty – With a cash buyer, the seller doesn’t have to worry about the buyer’s financing falling through. There’s less risk the deal will collapse.
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Flexibility – Cash buyers can remove contingencies like the financing and appraisal contingencies, making their offer more attractive.
Real estate sites Trulia and The Mortgage Reports say that many sellers will take a lower cash offer over a higher financed offer because cash is faster, more certain, and more flexible.
Should I Work With an Agent for a Cash Purchase?
Even though a cash offer gets rid of the need for a mortgage lender, it is still strongly suggested that you work with an experienced real estate agent.
Here are some key reasons why:
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Expert Negotiation – Agents are experts in negotiating home prices, contract terms, contingencies, and other details that are crucial for getting the best deal. They know how to structure a competitive cash offer.
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Paperwork Knowledge – There may be less paperwork without a mortgage, but contracts, disclosures, and other documents are still required. An agent can ensure everything is handled properly.
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Local Market Knowledge—Agents know the ins and outs of the local real estate market, such as average sales prices, how the competition works, and current trends. This helps buyers make smart offers.
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Property Valuations – Agents have access to comparable sales data and other tools to assess a home’s market value. This helps prevent cash buyers from overpaying.
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Showing Coordination – Agents can schedule and coordinate home showings, open houses, and other property viewings for buyers.
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Title and Escrow – Agents often have preferred title company and escrow contacts to handle the transaction details. Cash buyers still need these services.
Key Steps for Making a Cash Offer
If you decide to go the cash offer route, here are some key steps to take:
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Get pre-qualified – Before house hunting, talk to your bank or financial advisor to confirm you have adequate funds available for the purchase.
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Find an agent – Interview a few agents and choose one you trust to represent you in the transaction. Look for experience with cash buyers.
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Make an offer – When you find a home you want, your agent will help craft and submit a competitive cash purchase offer.
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Prove funds – You’ll need to provide proof of funds to the seller, usually via current bank statements and a letter from your bank.
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Consider contingencies – Decide which contingencies, like appraisal and inspection, make sense for your offer. Removal demonstrates seriousness.
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Negotiate – Be prepared for some back and forth on price, terms, and other details. Your agent will negotiate in your best interest.
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Sign contract – If accepted, you’ll sign a purchase contract. Your agent or title company can recommend an attorney to review it.
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Deposit earnest money – You’ll need to put down earnest money, typically 1% to 3% of the purchase price, after mutual acceptance.
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Final walkthrough – Do a final property walkthrough shortly before closing to check for any changes since you first viewed it.
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Close the deal – The remaining funds will be due at closing. Work with your title company to finalize the sale and transfer ownership.
Pros and Cons of Cash Offers
Cash offers come with some distinct advantages, but also a few potential drawbacks to consider:
Pros
- Faster closing timelines
- Lower closing costs without loan fees
- Removes risks associated with financing
- Greater flexibility in offer terms
- Buy any house, not just eligible for financing
Cons
- Requires available funds upfront
- Ties up money that could be invested elsewhere
- No tax break from mortgage interest
- Still pays other ownership costs like taxes and insurance
- Waives right to inspection and appraisal (if removed as contingencies)
Carefully weigh the pros and cons based on your personal financial situation when deciding if a cash offer makes sense.
Alternatives for Buyers Without Enough Cash
Some companies like Ribbon, Homeward, and Accept.inc now offer “cash offer financing” for buyers who don’t have enough of their own funds.
Here’s how these programs work:
- The company provides the cash to make the offer on your behalf
- They present the offer as non-contingent and all-cash to boost competitiveness
- Once the sale completes, you obtain a mortgage to buy the home from the company
There are fees involved, often 1% to 3% of the cash amount, but this can allow buyers to compete with cash offers. Experts suggest researching these companies thoroughly before using one.
Key Takeaways
While cash home sales don’t require mortgage lenders, knowledgeable real estate agents are still strongly recommended for their expertise and assistance.
Cash offers can be extremely enticing to sellers and give buyers a competitive edge. But they also require careful thought regarding pros, cons, and alternatives if your own cash is limited.
With the right preparation and guidance from an agent, making a cash offer can help buyers land their dream home in a fierce housing market.
Walk through with caution
The final walkthrough is your last chance to make sure, in person, that the house is being sold in the condition it was represented as being in.
Did all the requested repairs get made, and do those repairs seem up to the standard that you hoped? Did any damage happen to the home when the seller or tenant moved out? Did lightning strike the roof, and is it currently burning over your head (and on a more serious note — do you smell smoke)? Go through the final walkthrough slowly, be meticulous, and keep your eyes peeled.
A great way to ensure you’re doing the best walkthrough possible, especially if you’re doing it alone, is to take some trusted advice and use a walkthrough checklist. Some items might seem nitpicky or impractical, but no concern is too small or question too dumb if it saves you unexpected headaches (and costs!) upon closing.
Arrange for the appraisal, if you’re getting one
Appraisals are not required for a cash purchase because the only person whose money you’re risking is yours. However, some buyers still want to get the house appraised, especially if they’re working without an agent and don’t have a great sense of the market.
If your appraisal comes in lower than your offer, meaning you’re overpaying for the home, you’ll need to decide whether that’s a deal-breaker, how to handle it with the seller, and whether it’s worth going through the process of renegotiation. As a general rule, people do not like it when you attempt to take back money you’ve already offered them, so get ready for the renegotiation process to be a little socially sticky and uncomfortable — or to come up with the money to bridge any gaps yourself.
Pros and Cons to the ALL CASH offer in Real Estate. Audra Lambert 2024
FAQ
Do you need a realtor for a cash offer?
Buying a house for cash without a realtor can be done so long as you’ve done enough research. For the eager DIYer, buying a house for cash without a realtor could be the perfect passion project. And yes, it’s possible to save money when using a cash offer to purchase a property without the assistance of a realtor.
Can I make an offer without an agent?
Making an offer on a house without a Realtor® or a real estate agent is kind of like trying to represent yourself in a court of law — it’s possible, but it’s not a good idea. There’s more that goes into making an offer than landing on a purchase price.
What do you need to make a cash offer?
Original or online bank statements, a notice approving the line of credit, certified financial statements, or a letter confirming that cash is easy to get could be used as proof. If money is held in multiple accounts, ensure the total equals the amount submitted in your purchase offer.
Do you need an appraisal for a cash offer?
Appraisal: If you make a cash offer, the lender usually doesn’t need a formal home appraisal. This speeds up the closing process. Dec 19, 2023.