So, what is a cash offer on a house? A cash offer on a home is essentially exactly what it sounds like: a cash bid on the property’s total cost. When a seller can provide a cash offer, they’re in a position to bypass the conventional loan process and other financing hoops that can slow down the purchase process.
Although the phrase “cash offer” may bring to mind fancy briefcases filled with stacks of bills, sellers typically provide the “cash” by way of wire transfer into an escrow account until closing.
Ever since the 2008 recession, cash offers have become increasingly popular among home buyers. As of 2021, they account for over 30% of property sales.
In this guide, we’ll go over the benefits of cash offers for both buyers and sellers, why they’re so prevalent in Washington State and the Seattle area, how to make (and beat) a cash offer and more.
Benefits of Cash Offers on a House
Cash offers have a plethora of benefits for both home buyers and sellers.
Benefits of Cash Offers for Buyers
For buyers, offering cash to close on a home can skyrocket you to the top of the list in a tough bidding war — especially in a hot market.
Closing time decreases significantly because there are no financing hoops to jump through, and you can walk away with the keys to your new home faster.
Additionally, buyers who choose to offer cash may pay less than those with traditional loans. You can avoid bank and mortgage fees. as well as interest. Sometimes you can even purchase homes below the asking price because sellers see less risk.
Benefits of Cash Offers for Sellers
For sellers, cash bids are a pretty lucrative offer. With a cash offer, sellers don’t have to worry about last-minute loan denial, payment fall-through or other financial issues because the process avoids mortgages and loan officers. This also means getting a fast closing time and putting money in the seller’s pocket sooner.
Furthermore, cash purchases don’t require home appraisals. This is great for the seller because they don’t have to worry about the offer falling through if the home doesn’t appraise highly enough for some reason. Sellers can also rest easy when it comes to repairs, cleaning and staging because of the lack of underwriting and negotiating.
Sellers trying to move quickly as a result of difficult situations — such as divorce or a sudden job relocation — might find accepting a cash offer more beneficial because it’s faster.
And because a cash offer eliminates the mortgage process, buyers and sellers who opt for one also avoid what could end up being a lengthy underwriting process. Underwriting a mortgage can take up to 60 days, without a guarantee of approval. Both buyers and sellers save time with cash offers and remove the risk of last-minute loan denial.
[Related: Will the Housing Market Crash in 2022?]
Why Are Cash Offers So Prevalent in Washington State?
Because Washington State and Seattle in particular are such hot real estate markets, cash offers are often the fastest and securest way of closing on a house. Houses for sale in Washington State are frequently on the market for less than one week. Such a quick turnaround time can create a real battle among buyers.
In addition to writing letters to the seller, having great credit and being flexible on contingencies, offering cash is a fantastic way to place yourself at the top of the list if you want to buy a house in a high-demand market.
In fact, sellers close nearly 25% of houses sold in the Seattle area with cash offers. So, the next time you want to buy in a hot market, don’t get left in the dust. Consider making a cash offer and snagging the home of your dreams.
[Related: The Eight Best House-Hunting Apps]
How to Make a Cash Offer on a House
Making a cash offer on a house is fairly straightforward. Once you find the home you’re interested in purchasing, let the seller know you want to make a cash offer and tell them the price.
Once you agree on a purchase price (which can sometimes differ from the asking price), you’ll need to specify that the seller will accept a cash offer in a purchase contract and put down an earnest money deposit.
Before making your earnest money deposit to the seller, you’ll need to show the seller proof of funds. This is evidence that you have enough liquid cash available in an account to completely cover the house’s closing cost. Proof of funds can be a letter of endorsement from your bank or financial institution or bank statements showing how much liquid cash you have in your account.
Some buyers can choose to pay for a professional home inspection and appraisal, although they aren’t required because conventional mortgages aren’t involved. In an ultra-competitive market, some buyers opt to waive the appraisal and inspection contingencies.
Both parties will sign the cash offer and contract of sale. A title company or attorney will then open an escrow account, where the earnest money deposit will go.
Finally, after the buyer receives a clean and clear title report, the remainder of the cash will enter the escrow account for the seller, and will transfer ownership to the buyer.
Connect With Seattle Mortgage Planners Today!
If you’re interested in finding out more about what is a cash offer on a house, or want to discuss other aspects of finding and purchasing a home, Seattle Mortgage Planners can help. When you reach out to Seattle Mortgage Planners, a team of experienced professionals will review and discuss your options. So, what are you waiting for?
Contact us today — we look forward to working with you!
Featured image via Unsplash