According to Realty Trac, over 40% of home sales in the first quarter of 2014 were all-cash sales. For a seller, a cash offer may be the best bet especially with it getting harder and harder for sellers to qualify for a mortgage. But is a cash offer the best deal?
It is much harder for some buyers to qualify for a mortgage these days. Even being prequalified for a loan isn’t a sure thing anymore. A lender may check a buyer’s credit the day of a closing and decide they no longer meet their criteria for a loan. Or a lender’s appraiser’s figures come back lower than expected and they decide not to secure the loan. So a cash offer is worth considering,. There’s no lender involved with a cash offer so the risk of a lender denying a loan is eliminated.
If you are concerned that the buyer doesn’t actually have the cash, it should be noted that most cash buyers are investors looking to flip for a fast profit. Investors are almost always good for the money, but because they are paying cash, they are also great hagglers and look for the best price for the property. Meaning they will offer you cash paying in full but for a percentage of your asking price.
The Financed Buyer
There is a difference between being prequalified and being preapproved. Knowing the difference will help a seller and agents decide the strongest potential buyers. When a buyer is prequalified it basically means a lender asked a few questions and got a general idea of a buyer’s credit history and based on that decide that this buyer can potentially qualify for a loan.
Being preapproved means a lender has gone through a buyer’s finances with a fine-tooth comb and has passed the bank's extensive financial checks that include checking credit ratings, earnings and debt-to-income ratio. Based on that information, the lender makes an actual credit decision - which means that the buyer is good for the money being borrowed. It is not the same as cash, but with a preapproval it’s pretty much just as good.
If you are presented with a cash offer and a financed offer, the better of the two would be the cash offer if it is for the full asking price or as close to the actually asking price as possible. But don’t just go for the cash, there are other factors that need to be considered as well. Each offer is different and each requirement is different based on the seller’s needs. Just remember to take the time to go over each offer and choose what is best for you.