The Confusion Behind Cash Offers.

When certain misconceptions start to become “Groundhog Day” moments, it’s an indication that a crusade might be necessary to clear things up. Poor communication and lack of understanding by any of the parties involved in a transaction (including the agents) can lead to frustration, disappointment and worst of all, contracts failing to come together. That’s not a recipe for a great real estate experience!

“Cash Offers” are one of the recurring topics we’ve been fielding with both buyers and sellers lately. For buyers, it allows them to write a strong, clean offer in the quest to secure a property. And as a seller, what an exciting thing to receive a cash offer on your property! It makes you stand up a little straighter and feel like the world finally “gets” you  – or at least this buyer does. You feel yourself breathing more clearly, and fantasize that your allergies could be a thing of the past now too. Life is good. But wait, now your agent tells you the buyer is getting a bank loan. What?!? Hold that sneeze.

What the industry calls a “cash offer” is an offer that is not contingent on the buyer getting a loan to purchase your property. More clearly; there is no financing contingency. But they still may choose to get a loan. In fact, many do. Imagine your buyer going to their wealth management firm to pull out a large chunk of money to buy real estate. Most investment professionals would promptly take them by the shoulders and shake them. Because with interest rates as favorable as they are, it makes a lot of sense for most people to get a loan instead.

So where does that leave you? What does it mean? What it means is the buyer is so confident that they have, or can get, the “cash” to purchase your property that they’re willing to risk their earnest money for it. Cool. Just make sure the earnest money is substantial enough to keep them on board. Additionally, the Offer to Purchase requires that the buyer provides proof of funds to purchase your property within 7 days of acceptance. Proving to you that they are “good for the money” can come in a number of different forms. Many buyers will provide a statement from an account in their name that has a balance large enough to purchase your property. They don’t need to use the funds from that account to buy though. Others will provide a letter from a financial institution that states they have the funds. This is DIFFERENT from a pre-approval letter!

With clear communication and understanding, a cash offer provides a level of confidence for everyone involved and raises the odds against any weird bumps in the road as you travel toward closing. That’s a great real estate experience. ~ Wanda Boldon

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