Buying a place with cash

What buyers and sellers need to know about “all cash” offers

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You’re selling your home and a buyer submits an “all cash offer.” What does this mean and what are the advantages or disadvantages of buying a house with cash?

When a buyer is not making his purchase of your home subject to obtaining a mortgage, they can use a no-financing clause or they can use an all-cash-offer clause. In both circumstances, it means the buyer isn’t putting the obtaining of a mortgage as a necessary part of finalizing the sale of the home—getting a mortgage—the buyer’s financing is not a condition of the sale of the home.

There are three reasons why buyers make all-cash offers:

  • Your offer is more attractive to the buyer.
  • You can get a better deal.
  • Theoretically, you’re not going through the hassles of getting a mortgage.

However, as a buyer making an all-cash offer, there are some drawbacks:

  • You’ll be tying up a lot of money in one asset.
  • As such, you’ll lose the power of leverage that a mortgage provides.
  • You sacrifice liquidity on that invested money.

Still, in a hot market, all-cash offers are quite common, but it does mean the buyer needs to do his due diligence before making an offer on any property. This includes going through the process of getting approved (almost going through the complete mortgage process) for a mortgage, if a mortgage is required. If the buyer doesn’t do this, puts in an “all cash offer” on a home and then can’t get financing, the buyer will be legally liable for the purchase of that home. It’s at this point when messy court battles can start.

Read more from Romana King at Home Owner on Facebook »

6 comments on “Buying a place with cash

  1. I stopped reading at “You’re offer”…

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    • Thanks for catching that!

      Reply

  2. There is also the double hit – if one sells securities to obtain cash for the offer then ones income is inflated during that year and there could be capital gains tax and increased income tax. It was substantial hit in my case.

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  3. I have bought properties for cash in past,some fixer uppers included,which may or may not have been mortgageable.
    I have also bought houses for cash which could easily be approved for mortgage by lenders.
    I have always added the clause “contingent on a positive inspection”.
    I always found that term to be somewhat nebulous.
    What would be considered a positive building inspection and what would not?
    Is it up to the purchaser to decide the positivity?

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  4. One of life’s requirements to happiness ,IS OWN the roof over your head..If you can pay Cash..PAY CASH.

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    • I like this comment, Irish Guy

      Reply

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