When buying a home, many aspiring homeowners may want to pay in cash with the belief that the seller will cut the price, but there are also benefits for the seller.
Why Sellers May Prefer Cash
Sellers typically accept all-cash offers over other high-priced offers through FHA loans or conventional financing. The reason for this is that sellers know that cash offers are more likely to close. Sellers also like cash offers because of several benefits, including:
The Avoidance of Appraisals
Appraisals are everywhere and they’re not set in stone. Appraisals are most commonly based on comparable sales through the comparative method, which entails selecting three to six different properties and comparing their respective values to the real estate being sold, with adjustments made upward or downward depending on missing features and updates. If the home doesn’t appraise for the purchase price, and the buyer seeks a loan requiring a down payment of 20 percent or less, lenders won’t provide the loan unless the buyer has the money available, or the seller lowers the purchase price.
No Issues with Loan Funding
While a buyer may be entirely qualified to purchase a home with a loan, there are certain problems that can arise throughout the loan process. The home may not qualify, the buyer may not be able to meet the loan’s conditions, and loans that were once valid have expired during escrow. Lenders also often deny loans because of changes to the buyer’s qualifications upon closer inspection. The latter could be due to the buyer changing occupations or not being fully employed, or altered financial situations before closing following recent purchases or even identity theft.
Buyers don’t require 30 or 45 days for closing if they’re not taking out a loan. Following the inspection of the home along with other satisfied or released contingencies, sellers can close within seven days in many cases. The only condition is that the buyer needs to be willing to sign a lead paint waiver. Ultimately, faster closing means more quickly obtained payment for the seller.
Buyers will also benefit from paying cash, of course, eliminating the need for mortgage payments, increasing the buyer’s sense of security, preserving equity in the event of an emergency, and no restrictions on transferring titles as a result of an underlying loan. In the end, cash is best in many instances.