What’s the Deal with Making a Cash Offer on a House?

Let’s take a closer look to understand better how cash offers affect the process.

The appraisal

The fact that a cash purchase might not require an appraisal can be great for the seller because they don’t have to worry about what will happen to the offer if the house doesn’t appraise high enough. A loan contingent on appraisal could fall through, and the seller would have to find another buyer or reduce the price.

If you’re financing and trying to compete with cash offers, Barnes says his clients “were most successful with financing and trying to beat out a cash offer when they offered an appraisal guarantee.” He recommends being willing “to pay up to a certain amount above the appraisal if it comes in low or be willing to pay whatever the gap may be.”

You could also offer to pay for a second appraisal if you think the first was too high.

The inspection

Mortgage loans require an inspection to make sure the house is habitable and in good shape. Again, cash buyers can forego this step since they are taking on the risk themselves. This may be especially appealing to a seller if they know their home has issues and are attempting to sell as-is.

That said, foregoing a home inspection is a risky move for a buyer. Unless you’re buying for investment purposes and planning to completely renovate the house to rent or resell it, you’ll probably want to know what you’re getting into.

Fortunately, you can ask for an inspection and have a competitive offer. Home inspections are often used as a negotiation tool to ask for a lower price or for the seller to pay for repairs, but it’s also very possible to conduct one simply for peace of mind without asking the seller for anything.

This may work especially well in today’s market, where Barnes says sellers’ attitudes toward what they can get for their homes are behind the current trends. “We’re still seeing some sellers that want to get a good price and not have to fix anything,” he says. “They want to sell quickly with multiple offers, and they’re kind of lagging behind where the market is because they still think we’re in a red hot seller’s market.”

Using an inspection for informational purposes rather than as leverage for repairs can help make a financed offer more attractive.

Timing

Because cash buyers aren’t obligated to get an appraisal or inspection, these deals may close more quickly. This can appeal to sellers who want to move quickly and avoid their next mortgage payment.