✏️ Editor’s Note: Realtor Associations, agents, and MLS’ have started implementing changes related to the NAR’s $418 million settlement. While home-sellers will likely save thousands in commission, compliance and litigation risks have significantly increased for sellers throughout the nation. Learn how NAR’s settlement affects home sellers.
33.4% of sellers prefer all-cash offers. In fact, 34.1% of homes sold in September 2023 were bought with cash. This is the highest it has been in almost a decade! With 30-year mortgage rates fluctuating around the 8% mark, it’s no surprise that 78% of buyers financed their new homes with cash.
Cash deals lead to faster transactions and a quicker path to owning your dream home. It also helps you avoid the hassles of a real estate agent.
How Does a Cash Offer Work?
As a buyer, you make a cash offer on the house without a mortgage. Sellers favor this for its speed and certainty. Cash offers give you a competitive edge. However, you have to assess your finances before making a cash offer.
Consider your liquid assets and evaluate the impact a large purchase will have. It’s crucial to ensure sufficient funds for any post-purchase expenses. Engage a financial advisor to navigate potential implications and verify that a cash purchase aligns with your long-term financial objectives.
When Should You Make Cash Offers?
Making a cash offer under the following circumstances would make you the most profit:
- It is a Hot Seller’s Market: Home sellers get several offers in a hot seller’s market. You can stand out from the competition by making a cash offer. Sellers may prefer cash offers because they are more likely to close quickly.
- Interest Rates are High, but You Have Liquid Cash: With 30-year mortgage making a cash offer rates fluctuating around 8 percent, making a cash offer on the house can save you a fortune.
How to Make a Cash Offer on a House?
Here’s how the process of buying a house with cash works:
- Make an Offer: Present your offer to the home seller or the seller agent – either directly or through FSBO websites like Zillow. We recommend you hire a licensed real estate attorney to draft your offer.
- Negotiate the Purchase Price: You can skip the home appraisal contingencies. This can make your offer more appealing to a seller.
- Furnish Proof of Funds: Showcase a written letter from your bank or your bank account statement to confirm that you have the required funds.
- Sign the Purchase Agreement: After the above contingencies are fulfilled, both parties sign the purchase contract. It contains all the details like property basics, purchase price, closing costs, and more.
- Deposit the Escrow Money: Open an escrow account and deposit the earnest money into that account. Escrow deposits provide an added level of security to the transaction.
- Get a Title Report: A clear title and a meticulous transfer are key to a real estate transaction. Title insurance protects you if there is any problem related to the prior ownership of the property.
- Transfer of Ownership: Sign the deed to formalize the transfer of ownership.
- Conduct Home Appraisal and Inspection: This is an optional step but is highly recommended. A home appraisal ensures you do not overpay for the house. Whereas a home inspection ensures you save yourself from buying a property with serious defects.
How to Make a Cash Offer on a House Without Cash?
You can offer cash for houses without cash through cash-offer loan options. Cash buyers sometimes use a financing company to buy a property for them. Afterwards, they repay the company with mortgage financing.
Cash home financing works something like this:
- The cash financing company invests its own money on your behalf.
- Cash financing companies offer quick closing to entice home sellers.
- Impressed home sellers accept the cash offer, beating all other offers in their arsenal.
- After the transaction is complete, the company holds the property while you shop for a mortgage.
- You purchase property from the cash company using the money you obtained through the mortgage.
Companies That Will Help You Make All-Cash Offers
Several cash-offer companies offer all cash-offer financing. They charge a service fee of about 1% to 3% of the purchase price. Not all companies that give cash work in the same way. Some work with “buy before sell” home buyers, and some simply back your offers with cash.
Here are the top companies that will help you make appealing cash offers:
1. Ribbon Home
The company has two cash home-buying packages – Ribbon Boost and Ribbon Reserve.
- Ribbon Boost: Ribbon Home purchases a house on your behalf by backing your offer with cash and appraisal protection. You can repurchase your home at the same price by getting a mortgage through Ribbon.
- Ribbon Reserve: It is similar to Ribbon Boost, except you can move into your new house while shopping for a mortgage. This Ribbon loan package is ideal if you want to close quickly.
» Ribbon Home Reviews: Read to know which Ribbon loan suits you the best.
2. Homeward
Homeward helps you make a cash offer in three ways:
- Buy Before You Sell: Homeward purchases new property in full cash before you sell the existing one. You buy a new home and move into it. You list and sell your old home and then use the money to buy your new home from Homeward.
- Buy With Cash: To make your offer more competitive, Homeward backs your offer with cash. Unlike Buy Before You Sell, you need not sell your existing house. This Homeward loan option empowers first-time home buyers to make cash offers.
- Cash-Backed Offers: If your mortgage financing falls through, Homeward backs your offer with cash. However, you pay a 1% fee, even if you don’t use all the cash.
» Homeward Reviews: Discover how Homeward differs from other cash-offering companies.
3. Homie Cash
Homie Loans introduced Homie Cash in 2021. It enables buyers to make all-cash offers. The company levels the playing field. They help buyers to compete against investors and iBuyers such as Opendoor and Offerpad.
Homie allows you to make cash offers and enter the competitive market. As a buyer, you must understand that you still need to get a traditional mortgage to pay back Homie Loans. Thus, you incur two closing costs on one transaction.
» Homie Reviews: How this cash offering company works?
4. Opendoor Cash Offers
To secure a cash offer through Opendoor, you need a mortgage pre-approval first. Opendoor pairs you with one of their agents to help you figure out your cash offer budget. The agents also helps you negotiate various contingencies involved.
The seller’s agreement leads to Opendoor buying the house with cash. Then, the company holds it on your behalf. In the meantime, you can shop for the mortgage and buy back your house from Opendoor.
» Opendoor Reviews: Everything you need to know about Opendoor Cash Offers.
5. HomeLight Cash Offer
HomeLight is a cash offer company that deals in both buying and selling houses. The company is willing to make cash offers on your behalf and resell it to you if you meet their cash offer criteria.
HomeLight offers a guaranteed closing, which sets them apart from other cash financing companies.
» HomeLight Cash Offer Reviews: Read what cash home buyers have to say about HomeLight.
Pros and Cons of Cash Offer on a House
Here are the benefits and risks of a cash offer on the house:
Benefits of Making a Cash Offer on a Home
- You Save Hundreds of Thousands in Mortgage Payments: As of November 2023, mortgage rates in the United States have experienced an increase. By making a cash offer, you save several hundred thousand in mortgage payments.
- Home Sellers Will Find Your Offer More Appealing: Lower risk of fall through, simpler & quicker closing, and fewer contingencies make cash offers appeal to most home sellers.
- You Will Cut Down on the Closing Costs: When you skip financing, you don’t have to pay mortgage-related closing costs.
Risks of Making a Cash Offer on a Home
- A Significant Liquidity is Tied Up: A big chunk of your investment gets trapped in a non-liquid asset. If an emergency arises, you will have limited funds in hand.
- You May Overpay for the Property: When getting a mortgage, the lender requires the buyer to get the property appraised. While making a cash offer, you have no such obligation, and you might end up overpaying.
- You Will Lose Out on Mortgage-Related Tax Benefits: Mortgage payers enjoy tax incentives in the form of mortgage interest deductions. As a cash buyer, you will miss out on these benefits.
» Pros and Cons of a Cash Offer on a House: Read before you make a cash offer.
Should You Make an All Cash Offer?
Yes, you should make cash offers on houses. With mortgage rates on the rise, cash offers are more appealing than ever.
It will make you stand out from other buyers and ensure you close on the house quickly. In case you don’t have cash in hand, work with a cash-offering company that can make an appealing contingent-free cash offer on your behalf.
Frequently Asked Questions
How do you make a cash offer stronger?
You can strengthen your cash offer by:
1. Offer above the asking price
2. Include an escalation clause
3. Craft an appealing offer letter
Learn more about the working of cash offers.
Are cash offers more likely to be accepted?
Yes, a cash offer is more likely to get accepted. Because a cash offer involves fewer contingency, offers quick closing, and is less likely to fall through. Read more to know how to make a cash offer on a house.
Can you make a cash offer without proof of funds?
No, you cannot make a cash offer without Proof of Funds (POF). A home seller will most likely ask for a POF to confirm that you have the offered amount with you. In case you do not enough cash here's how to make a cash offer without cash.
