Cash versus Conventional Offers

With a competitive sellers’ market right now, it’s hard to get a leg up on other offers. If you are a buyer looking for a home, you may have lost a bid to a cash offer. They always say cash is king, so does cash automatically trump any other offer? Not necessarily. When you actually compare a cash offer versus a conventional offer there may not be a big difference. The big benefit to a cash offer as a seller is the offer is not contingent on financing, therefore it’s a pretty solid offer. There is less that can go wrong. A cash offer can also close quicker than a conventional offer because you are not waiting for the bank. As a seller, if you need to sell quickly, cash is definitely more appealing.

Sometimes people think that because an offer is cash it is more valuable- therefore you can offer less. To some extent this can be true, but a lot depends on the motive of the seller. If you have two offers and one is cash for $200,000 with no inspections and one is conventional for $210,000 with no inspections- I personally would take the conventional offer. It’s an additional $10,000 and is still a very strong offer. It will take slightly longer to close, but as long as the seller isn’t on a time crunch its typically not a big deal.

As a buyer, if you are able to purchase a property in cash there are some added benefits as well such as fewer closing costs and no interest payments. A lot of closing costs stem from the bank and appraisals. With a cash offer you cut that whole aspect out of it, thus saving yourself some money. On the flip side, using cash to purchase a home obviously ties up a lot of money. Getting a mortgage can sometimes be helpful to continue to leverage your money and keep money in the bank. If you have a lot of money to spend than maybe it’s not an issue, but it’s always good to have some cash in reserves.

Whether you prefer cash or conventional, there is a little give and take with both.  Ultimately as a buyer it comes down to what you want to do with your money and how you want your money to work for you. As a seller, it purely depends on your motivation to sell and how quickly you want to do that. Everyone has their reasons, you just need to do what works best for you.