Is a cash offer King? Myth or truth

Real Estate

Is a cash offer King? Myth or truth

For years we've heard the term cash is king. So is this true in a real estate transaction? The answer to that question is yes in some situations and no in others. Nothing like leaving this question unanswered and confusing.

A cash offer is always king with a foreclosure. The reason being is, banks want as little hassle as possible when selling a foreclosure. The three things that banks seem to dislike the most are inspections, appraisals and seller paid closing costs. Most buyers who purchase a foreclosure with cash don't ask for seller paid closing costs, many do not have a home inspection and because there's no mortgage, there is no appraisal. So in these situations, many times banks will take a lower cash offer than a higher financed offer just to avoid the hassle.

Where cash is not king is in a traditional purchase. Before I go further I want to clear up one thing. If all offers were exactly the same, cash would always win in a situation like this. For most seller's it's less hassle so it makes sense. But more often than not the cash buyers come in with a lower offer thinking that with a hassle-free offer, they can lowball. In a situation like that, most traditional sellers are trying to sell the home for as much money as they can. If that's the case they will take an FHA or conventional offer for more money than a cash offer.

Just like in every other situation, each purchase is going to be different. Many times you don't know the motivation of the seller specifically if it is a traditional sale. It's always a good rule of thumb to put as much money down as you can. Unless you need seller paid closing costs, then an option for you would be to put less down and cover your own closing costs. That alone may put you on a more level playing field with a cash offer.

To watch a video version of this blog, click the link below-

To listen to a podcast version of this blog, click the link below-
Listen to "Is A Cash Offer On A Home King?" on Spreaker.