Brought to you by Scott P. Rogers, Funkhouser Real Estate Group, 540-578-0102, scott@HarrisonburgHousingToday.com
Brought to you by Scott P. Rogers, Funkhouser Real Estate Group, 540-578-0102, scott@HarrisonburgHousingToday.com
Friday, August 13, 2021
Many sellers, when receiving a cash offer and one with financing, ask themselves (or their agent) whether a cash offer is really that much better than one with financing.
As with many questions in real estate, it depends...
First, a $400K cash offer and a $400K offer with financing will both (any other contingencies aside) result in the same amount money going to the seller -- $400K less mortgage payoffs and transaction costs.
So, in that way, a cash offer and an offer with financing are pretty similar -- the seller gets the same amount of money.
These two offers, though, start to feel pretty different...
- $400K cash offer
- $400K offer contingent on 95% financing with an unfamiliar out of town lender and a very small deposit
In this case (above) the second buyer is likely is not very financially capable and that could mean there would be difficulties in the buyer obtaining financing to complete the home purchase. The fact that the lender is an unknown variable can also give a seller pause as they compare the two offers.
These two offers, though, may very well seem pretty similar to a seller...
- $400K cash offer
- $400K offer contingent on 80% financing with a well known and reliable local lender and a sizable deposit
In this case (above) the second buyer would seem to be very financially capable, in that are putting a sizable deposit down and have a significant amount of funds to use as a down payment. The fact that the lender is a known variable (local, reliable) means that the offer is very likely to proceed quickly and smoothly to closing.
So, in the end -- should a seller look at a cash offer as being undoubtedly better than any offer with financing?
Not necessarily.
An offer that is similar in offer price, with 80% financing, a sizable deposit, and where a buyer is working with a known local lender is just about as strong as a cash offer in almost all circumstances.
