Comparing Cash and Financing Offers When Selling Your House

Home Builder with Westbrook REI (We Buy Houses) CSLB 1047535

Cash vs. Financing What offer should I Accept?

cash or financingNegotiating the sale of a house that you own is not always as simple as it sounds. Offers come in all shapes and sizes and they need to be evaluated based on the criteria that you established when you established the sales price.  Remember that each offer is as unique as the buyers themselves and any offer that you receive will reflect  what's best for them. Also keep in mind its not personal,  they don't know you or what you are looking for, all they see is the asking price.

Certainly there are other market forces that can influence the types of offers you receive, such as a Buyers or sellers market, the condition and location of individual house and of course whether they or not the buyers require any financing.

With all offers, you need to evaluate the different exclusions, concessions, and contingencies within to understand exactly how they are different from one another and how much cash you will receive when the transaction finally closes.

When comparing offers be careful because sometimes a minor difference can cost you thousands of dollars. So when comparing all cash and financing offers I would suggest that you enlist an experienced third party to help you traverse the process (a trusted friend, accountant,  financial adviser or "good"real estate agent) as they can provide three things;

1) a pause in the negotiation and clear analysis of the numbers and
2) an independent sounding board where pricing strategy can be discussed without the buyer present and
3) a non emotional look at how all things match up to your goals. It can be a real advantage in getting what you want.

For the most part I don’t use the services of a real estate agent as a seller because I like to negotiate directly with buyers and buyers agents, but unless you are experienced at it or laser focused on the numbers it can be a good idea to be able to pause negotiations at one point or another especialyy if there are mutiple offers in a sellers market. The thing to remember is to not get greedy.

Case in point; I remember I had just finished the rehab, remodel and addition on one of my houses and placed the house on the MLS the previous night through my seller agent. Activity was really good for a Friday evening. I had three or four buyers walking through the house at the same time and I was already looking at two offers.

And then a buyer came in and without even looking at the entire house (she loved the open kitchen) she said… “If I make an all cash offer what kind of discount can I get?” I thought about it for a moment and my response was simple. I said “it really doesn’t matter to me whether its cash or not because when the transaction closes I am going to get the cash either way”. “But how much are you offering?”

I wasn’t sure that what I had said was going to motivate the offer I wanted, but I wasn’t going to start negotiating against myself either,  so the answering of a question with a question put the ball back in her court.

Of course I wasn’t expecting a full price offer, she had already said that she wanted a discount. I liked the challenge and the buzz it created. In my mind, this was the kind of activity that sells a house quickly and what I love about my business and interaction with buyers and sellers.

Remember if all things are equal the best offer is a cash offer at full asking price with no contingencies and closing in less than two weeks. Agreed?

Cash for Houses CABut most of the time all things are not equal and this buyer walked in off the street and was not represented by a real estate agent. I knew that my $195,000 asking price was a little high and I also knew that with the absence of the 3% - 6% sales commission, I could accept less than a full asking price because of the savings on commission alone. There are other factors too, like holding cost (utilities, mortgages, insurance, property taxes, maintenance, etc). Most people look at the big number and forget about the many little ones that tend to add quickly. Always remember that you have holding cost and they are real and they come right off of the top.

It really makes you stop and think. “Is Cash King”? “At what point am I not willing to accept an all cash offer over an offer with financing”?

In this article I will discuss the pros and cons of each and how they relate to most real estate transactions.

According to research by Realty Trac, in 2014, over 40 percent of all home sales were from all-cash buyers. For people selling a home, this sounds like excellent news, but there is always a caveat. Most home sellers will never see an all cash offer simply because houses that have been purchased with cash are by investors purchasing foreclosures from banks or other distressed properties from homeowners.

In most cases Cash is considered the best bet, and you don’t have to take your chances with a buyer who needs to jump through hoops to get a mortgage to buy your property. But is the cash offer always the right answer for your home sale?

The Advantage of Cash for any House

We’ve all heard that Cash is king, but in any real estate transaction you need to determine the context of the offer and the ability of the home buyer to actually close. As a rule, a cash offer should always be considered, because a failure to obtain financing is the main reason why most home sales fail to close. In fact, according to Zillow, 1 in 3 Mortgages fell out of escrow due to financing in 2014. In the new era of Dodd Frank and strict lending criteria, the addition of TRID some buyers no longer qualify for a mortgage. In other scenarios, lenders won’t approve financing because the appraisal comes in lower than the purchase price. Keep in mind that with a Cash Offer there is no lender and there are generally no appraisals, so both of these risks are usually eliminated.


Not all Houses are Created Equal and Houses need to Qualify for Lending as well.

Most home Sellers don’t ever see a cash offer because most Home Sellers have homes that are in or close to market ready condition. The Houses, can pass multiple inspections, have minimal appraisal issues (if priced right) and are represented by a real estate agent willing to list it. This is the “sweet spot” for both the home seller and the real estate agent. 98% of the offers received on this type of house will include bank financing. It is rare for these home sellers to ever see a cash offer.

So what happens when the House in question has so many issues of deferred maintenance, title issues or code violations that it can’t be financed by any bank? What is a home seller supposed to do?

The answer is really simple: When the asset becomes a liability and starts to slowly drain your others assets it’s just time to sell. Forget about losing value, I am talking about a house that will never be worth more than it is right now. Ask yourself the hard questions am I ever going to be able to afford to fix it up? Am I ever going to see a profit? Unfortunately most people don’t realize that an asset that continues to deteriorate and becomes a burden is no longer an asset. It’s time to sell.

The Myth of the Cash Discount

As I stated above, most home Sellers do not ever see a cash offer because most cash home buyers are investors buying properties that no one else wants. They typically make lower offers that others frequently call discounts.  Lets be realistic, a reduced price on a house that nobody wants is not a discount... it is a cash value offer. 

According to recent research by Goldman Sachs, Cash Home Buyers/Investors offers almost always come in at a reduced price, but the context of those offers have to be analyzed.  Often times the properties in question have multiple and costly code violations or other deferred maintenance issues and liabilities that need to be factored into the value of the house. Repairs and deferred maintenance items are not discounts they are real cost that need to be taken off of the top.These properties are notorious for receiving cash offers.

If you own one of these properties, you can take the all-cash offer, and it’s a safe bet that you’ll get your cash at the end of the day when the transaction closes. But that cash offer may be considerably lower than what yours houses perceived market value is as stated by Zillow and or a Real estate Agents Comparative Market Analysis (CMA); by 20 percent or more in some cases. Remember, however, that online values (are created by a computer driven algorythm) and those provided by a CMA are comparisons that don't take into consideration the condition of the house. The trade off, however, is that Cash Buyers will usually buy a house in its Current As-Is condition without contingencies, without inspections and without appraisals. Imagine not having to pay for any repairs, complying with codes for un-permitted work or even cleaning up. Most Cash Home Buyers even pay the closing cost. So what is that nepharious discount that indusrty professionals speak of other than a myth?

How Big a Risk is the Financed Buyer?

Buyer FinancingMany buyers come to the table pre-qualified for a loan. But pre-qualification letters are not very powerful once you realize that they are simply a glace at a prospective buyers credit. Some lenders will take the time to verify the borrower’s financial picture; others will take a few details over the phone and make a decision. These Buyers are NOT pre-approved and pose a risk to any home seller. Even though pre-approved buyers are thought to have passed the bank’s first extensive financial checks, including checks on credit ratings, earnings and debt-to-income ratio, the early approvals are still not final approvals. Based on these checks, the lender makes a review as a credit decision – which means that the borrower in theory is good for the money he is borrowing. It’s not cash, and in today’s real estate market they can still fail the final underwriter’s approval. Remember that 1 in 3 deals fall out of escrow because of financing. It is a numbers game.

Choosing the Best Offer for You

Like I said, the best offer is a cash offer at full asking price with no contingencies and closing in two weeks. Not surprisingly, these offers don’t come along very often. But when they do, the seller must choose between a cash offer and a higher financed offer.  The buyer must also weigh in the cost of sales commission to a real estate broker (usually 6%) and closing costs. Which one is better depends on a host of factors: whether the financed buyer is pre-approved, the contingencies required; how quickly the buyer can close and whether there are other incentives on the table, such as the buyer picking up your closing costs. View the offers carefully because there’s a lot more to it than the asking price. Either way, don’t be pressured by your agent or anyone else into choosing any offer. You have the final say and should take the time to choose the offer you prefer.

Sometimes the certainty of closing is enough for people to want to go ahead with a cash offer, even if it’s lower than an offer wih financing. To others, it doesn’t matter if their property falls out of escrow because of financing, as they are just waiting for the best possible deal.

In any case take your time, review the numbers and if you are diligent you will be successful Comparing Cash and Financing Offers When Selling Your House and you can close with an offer that you are happy with.

My name is Peter Westbrook and I am a real estate investor with "Westbrook REI" and "We Buy Houses in any condition in Stcockton, Sactamento, Modesto, Lodi, Manteca, Ripon, Ceres, and its surrounding areas". We are the best at what we do because we work at it every day. We have years of experience and a plan that we follow. We are a real company with real people that are committed to helping you achieve your goals.

If you need to sell your house fast call us at (209)481-7780... we'd love to make you a fair no-obligation no-hassle all cash offer.. You've got nothing to lose, and we'd love to earn your business.


Posted by

Peter Westbrook is a Real Estate Investor With Westbrook REI located in Stockton California. He specializes in buying distressed properties throughout Northern California and Tulsa Oklahoma.  Peter is not only an active real estate investor, he is the author of many real estate articles and also a sales and marketing trainer for new and seasoned real estate investors and agents. Peter can be reached at 209-481-7780.

Comments (20)

Susan Laxson CRS
Palm Properties - La Quinta, CA
Realtor in San Diego, CA & Naples, FL

Hi Peter, it definitely depends on the rest of the terms, but you are right in saying at the end of the deal they are all cash offers to the seller, even if they are FHA or conventional loans. I personally favor all cash, quick close deals.

Mar 24, 2016 04:51 AM
Peter Westbrook

The only thing that really matters is that they close. Lately I've seen more than just a few financed offers fall by the way side.

Mar 24, 2016 03:27 PM
MaryKay Shumway
The Kellstrom Ray Agency, Inc. (Est. 1948) - Sister Bay, WI
Door County Wisconsin's Real Estate Expert

I thought this was a REALLy excellent piece, exploring the pros and cons of both cash and financing, and throwing in some great additonal details that will cause both the Buyer and Seller to think.  You used some great data, but also a lot of personal insite.  A good read.  Congrats on the feature!!

Mar 24, 2016 08:18 AM
Peter Westbrook

Thank you for the kind words

Mar 24, 2016 03:12 PM
Paul McFadden
Responsive Pest Control - Seattle, WA
Pest Control, Seattle, WA.

Up here inventory is almost non-existent and cash is still king (at least 30% of transactions were cash). I could see how cash might often win as the deal closes quicker and everyone gets paid sooner. Thanks!

Mar 24, 2016 09:04 AM
Peter Westbrook

Its amazing I just read a report that in November 2015 40% of all transactions were cash...

Mar 24, 2016 03:29 PM
Carla Muss-Jacobs, RETIRED
RETIRED / State License is Inactive - Portland, OR

I'm sure that's the same response she would have received at the car dealership.  It doesn't matter if she's paying cash and that doesnt' get a "discount".   

Mar 24, 2016 11:24 AM
Elizabeth Weintraub Sacramento Broker
Elizabeth Anne Weintraub, Broker - Sacramento, CA
Put 40 years of experience to work for you

I love listing fixer homes because the offers come fast and furious. There are more investors in Sacramento wanting fixer homes than there are fixer homes available. I have a good handle on repair costs, having flipped and fixed up homes myself. There are those who want to steal the home and then there are those who realize they have to pay a little bit more, get into the game, and then they'll win the home. Or . . . they can stick to FSBOS. I'm a hard-line negotiator for my sellers.

Mar 24, 2016 11:59 AM
Peter Westbrook

I noticed that you work for Lyon. That is great. 35 years ago I used to know Mike Lyon and Laura Lyon pretty well. I sold them a few phone systems in another life.

Mar 24, 2016 03:16 PM
Athina Boukas
Virginia Capital Realty - Richmond, VA
Certified Residential Specialist (CRS)

Cash, full price, quick closing is the best. Everything else is more likely to fall through but that's where back up offers can work well.  With tight inventory in some places in NC I have seen up to three back up offers on one house within one month. In one case, the first two failed due to low appraisal. The third offer finally closed, all cash, and for a higher than asking price!

Mar 24, 2016 12:09 PM
Peter Westbrook

It's hard to argue with cash, 2 weeks... they should all be so easy.

Mar 24, 2016 03:31 PM
Don Taber
RE/MAX Complete - Wilson - Wilson, NC

I think you did a great job with this article. I'm sorry you don't particularly like working with real estate agents but I do understand the need to participate more in the give and take of the negotiation process.  That being said, I have to say that last year, even with TRID coming in to play, I didn't lose any deals because of the tightening of credit.  There were some that were not able to get pre-qualified but every one that went under contract, and did not terminate, closed.  You said, "those (values) provided by a CMA are comparisons that don't take into consideration the condition of the house."  If the Realtors you are using do not take into account the condition of the house when they give you a value, you need to find some new Realtors to work with.  How can an agent give a true picture of the value of a property without taking into account the condition?  Otherwise, great post!

Mar 24, 2016 03:30 PM
Peter Westbrook

I am sorry if i came off as NOT liking to work with Real Estate Agents. Actually I work with buyers agents all of the time. I just like negotiating my own sales.... I like the juice. As far as CMA's go, most agents are running the CMA's quickly as an obligation with very little  analysis of the subject property to others recently sold. I agree with you, but most dont want to participate in the details. Thanks for the comments.

Mar 24, 2016 03:43 PM
Sam Shueh
(408) 425-1601 - San Jose, CA
mba, cdpe, reopro, pe

Today with Trid  and long COE cash is favorable again. In several cases cash with 7 day coe beats higher offers as most appraisal will come out short.


Mar 24, 2016 05:01 PM
Peter Westbrook

TRID is just another layer in a myriad of other regs that have no real value for 99% of the market. They just delay commerce and real financial recovery.

Mar 25, 2016 04:04 AM
Kat Palmiotti
eXp Commercial, Referral Divison - Kalispell, MT
Helping your Montana dreams take root

Two offers exactly the same, one cash, and one mortgaged, sellers would usually choose the cash. However, as you point out, cash offers are usually NOT the same and are often a discount. A lot goes into the decision on whether or not to accept them.


Mar 24, 2016 09:00 PM
Peter Westbrook

Financing is so fickle, I am a cash kind of guy. It brings closure.


Mar 25, 2016 04:02 AM
Sham Reddy CRS
Howard Hanna RE Services, Dayton, OH - Dayton, OH

Of course, cash is King!!! But other coniserations need looked at.

With all offers, you need to evaluate the different exclusions, concessions, and contingencies within to understand exactly how they are different from one another and how much cash you will receive when the transaction finally closes.

Mar 24, 2016 09:04 PM
Peter Westbrook

Thank you

Mar 25, 2016 04:01 AM
Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

In the end as well as the beginning, math goes to work and then tells its story

Mar 24, 2016 10:34 PM
Peter Westbrook

it's always about the numbers, thanks for reading


Mar 25, 2016 04:01 AM
Laura Filip
Laura Filip Broker , Opening doors for All Seasons of Life - Whitesboro, TX
What can we do for you today?

Great post but way to long .... Cash is king for sure a full price offer with no contingency are much better than financing with contingency 

Mar 25, 2016 12:18 AM
Peter Westbrook

Thank you and you are right... brevity was never my strong suit except for now.

Mar 25, 2016 03:58 AM
Compass - La Jolla, CA
San Diego Partner - The Private Client Network

Good Morning Peter Westbrook fantastic comparison between cash offers and an offer with financing attached.

Mar 25, 2016 01:35 AM
Peter Westbrook

Thank you

Mar 25, 2016 03:59 AM
Nicole Doty - Gilbert Real Estate Expert
Zion Realty - Gilbert, AZ
Broker/Owner of Zion Realty

There isn't a lot of cash in my market anymore. Most of the big investors moved on to Florida and other parts of the country where flipping is still big. 

Mar 25, 2016 01:39 AM
Peter Westbrook

you would be surprised what's going on with the little guys in your market under the radar.

Mar 25, 2016 04:00 AM
Lisa Friedman
Great American Dream Realty - Essex, VT
35 Years of Real Estate Experience!

Very detailed and well written article with a wealth of information.

Mar 25, 2016 01:44 PM
Peter Westbrook

Thank you for the comment. I appreciate it very much.

Mar 29, 2016 10:29 AM
Lisa Friedman
Great American Dream Realty - Essex, VT
35 Years of Real Estate Experience!

I also wonder where they get this figure of one third of sales falling through due to mortgages. I have only had a handful of sales fail due to mortgages in 27 years.

Mar 25, 2016 01:45 PM
Peter Westbrook

Interesting analysis on your part because the "great" agent is going to know their buyers pretty well and have the paln in advance for qualifying. The character of client and agent goes a long way. I just dont think evetryone out there can spot the risk and be able to work through the issues and have a workable plan C..

Mar 29, 2016 10:32 AM
Raymond Edler
Keller Williams Realty Dallas Fort Worth 214-552-2091 - Prosper, TX
#1 Real Estate Office in DFW

Nice article, great point that the house needs to qualify for the loan as well.  

Mar 25, 2016 11:28 PM
Peter Westbrook

Thanks Ray, all too often we forget thet the subject property is more important as the credit score. .. its the asset


Mar 29, 2016 10:25 AM
Kathleen Daniels, Probate & Trust Specialist
KD Realty - 408.972.1822 - San Jose, CA
Probate Real Estate Services

We must evaluate all offers very carefully.  I receive many all cash offers with an appraisal contingency … there is motive behind some offers that we may not see on the surface.  In the end, the seller will get cash from a well-qualified and well-vetted buyer.  Cash is Cash – not King. 

Mar 26, 2016 01:27 AM
Peter Westbrook

Well said, there are always motives, and I think that you hit the nail on the head. Its interesting how conversations can change by inserting the one contingency, one word... appraisal as you indicated. Unwhittingly accepting that offer and most sellers agents and sellers melt and fall for the trap. Oh my. Great comment. 

Mar 29, 2016 10:28 AM
Inna Ivchenko
Barcode Properties - Encino, CA
Realtor® • GRI • HAFA • PSC Calabasas CA

If all else is equal, an offer from a cash buyer will trump one from a buyer who requires financing 100 percent of the time. 

The reasons are obvious:

No waiting for lender approval means a quicker close

No issue with the buyer not qualifying

Unless the cash buyer asks for an appraisal contingency, there is no issue with the property not appraising.

Dec 12, 2016 11:02 PM