How Financing Details Affect Your Offer
If you are a fortunate real estate buyer making a cash offer to buy a home, there are certain things you should consider when making an offer vs those who finance.
First and foremost, you are offering one less contingency than those buyers who finance. If your offer is accepted, the only contingency you may have is for an inspection or perhaps an appraisal. You have less outs in a contract and that is worth it’s weight in gold to a seller.
Cash is King
True to the saying, cash can be king when it comes to making an offer. That doesn’t mean you are going to get the property for 20% or 30% more off the list price, but it does offer significant benefits to the seller since they will have a much greater chance of closing without a financing contingency – especially with today’s extremely strict lending requirements.
If a seller asks for proof of funds when making a cash offer, do not take it personally. Provide bank documentation with your offer that shows you have the funds available. Your bank can give you a proof of funds letter that equals the offer amount so that you don’t have to show the seller you have a heap of money in the bank. If the seller sees big dollar signs in your documentation, he may ask for more money in his counter-offer than he would of if he had just seen a bank letter stating the same amount as the offer.
In a declining or unstable real estate market, the best advice with cash offers is to include an appraisal contingency with your offer. You can always decide whether or not you actually want to go ahead with the appraisal, but at least you have the option for a specified period of time. If the appraisal comes back way below the contract price, you can renegotiate with the seller or cancel the contract in writing.