In a financial environment where many loan providers are tightening their purse strings, there has been a rise in the number of cash buyers looking to invest in real estate. Whether the sale is made directly using cash or through a mortgage, the seller receives the same amount of money (though not in all cases, which we’ll cover).
So why then is a cash offer usually seen as more attractive than an offer to purchase with a mortgage? The answer ties in with the three things most sellers want out of any transaction (aside from a fair price): a speedy sale, one that is certain to go through and the ability to move on. This combination is what gives cash buyers the upper hand in securing their choice of property over those who need to seek outside financing.
The Speed of the Offer
Cash buyers already have everything they need to go ahead with the transaction; they’re just looking for a suitable property and a willing buyer in order to make an offer. For everyone else who needs to borrow in order to enter the property market, it is not quite that simple. Yes, they can make offers, but they are not backed by anything concrete until they have been approved for a loan.
In the case of those seeking outside finance, an offer is more of an intention than a direct request to purchase the property as soon as possible. Cash buyers have this power, and it allows them to give the seller a tangible offer to mull over almost immediately.
The Certainty of Closing
Offers made on the contingency that financing can be found are totally reliant on outside sources. If they are not approved for a loan then the sale can’t go ahead. Conversely, cash buyers hold the world in their hands, and are completely in charge of their own proprietary destiny. Sellers know this and know that an offer of cash is far more of a sure-thing than an offer to purchase via a mortgage.
This certainty is so attractive to some sellers that they are even willing to accept less than their asking price, or less than any competing offers, to be sure the sale will go ahead. Bringing a finance company into the mix can cause the deal to collapse at any moment, cash doesn’t have this problem.
The Flexibility to Move On
With a prompt offer that will only fall apart if either party elects to back out of the deal, comes the flexibility to move on as soon as possible. It’s quite simple really, no seller wants to go through a long, protracted sale process, and cash buyers are the surest way to avoid this. If the seller wanted to use the money to travel round the world, invest in another property coming on the market or even had to sell as quickly as possible as they had already put an offer in on another house, they can now do all of that. Cash buyers allow sellers to move on with their life, which often makes them a more attractive prospect than one who has to wait for financing.
If you do have the ability to purchase your next piece of real estate with cash, you’ll now realise why this may give you the upper hand.