When you are selling your house, a buyer can use a no-financing clause or an all-cash-offer clause. In both cases, it implies that the buyer is not considering ‘getting a mortgage’ to be a part of closing their deal. Instead, they are planning to either finance the deal themselves or have a private/hard money lender financing them.
This is a great opportunity for sellers. Honest and committed real estate agents would be happy to tell you that the highest offer is not always the best offer in real estate. In fact, the cleanest offer is the best offer you can get when you are looking forward to sell your property.
Why is an all-cash offer better?In some cases, a buyer is fully qualified to purchase a home initially with a loan. However, several problems may arise during the loan process.
One of the biggest problems with financing is the appraisal. The most common method involves the dependence on comparable sales which is also referred to as the comparative sales method. This requires analyzing various properties to compare them to the property in question by assessing crucial factors including the features, amenities and location.
The home may not qualify, or other conditions for loan approval can get in the way of a buyer obtaining financing. If a home does not appraise for the purchase price, then the lender is not going to loan more than the appraised value. Although there are a few other options to manage a low appraise, such as when the buyer coughs up more funds or the seller cuts down the selling price, it can also result into a cancellation of the contract and possibly with an argument over the good-faith deposit.
In an “all-cash offer” the buyer provides his own financing, either his own cash or a private loan. In either case the money is not contingent on appraisal or credit approval. This means that the offer will not fall apart at the last minute just because the buyer didn’t get pre-approved or the bank requires the buyer to use money he or she doesn’t have.
This is why such a deal takes most of the risk out of the contract. It is fairly common to come across deals where sellers prefer a lower priced all-cash offer over a higher priced offer that comes with conventional financing.
As soon as any contingencies have been fulfilled; closing will usually take place in fewer than 30 days. Naturally, the faster a deal closes; the quicker a seller gets his money into his pockets. Since time is one of the main concerns of a typical seller, it is usually in his or her best interest to opt for an all-cash offer.
An all-cash offer is more attractive since it closes quickly and doesn’t require appraisal of approval, so sellers can get a better deal out of it with less risk.
Bottom LineAlways work a professional real estate business or a licensed realtor who you can trust. These professionals possess the necessary experience to help you achieve your major goals in selling your house, selling quickly and for the best value.
Kyle is a real estate agent/real estate investor in the Stockton area in California. He specializes in getting homeowners and landlords out of tough situations by buying their properties quickly and with cash and then remodeling the properties for a profit.