Are Cash Offers Better for Sellers?

Getting ready to sell your home? No matter the listing price, you may find yourself getting at least one cash offer. In February 2024, 33% of home buyers (including real estate investors) financed their purchases with cash, according to the National Association of Realtors.

But are cash offers better for home sellers? That depends on the offer — and the seller.

If you're looking to sell your house fast or don't want to deal with contingencies, a cash offer may be ideal for you. But if you might need more time to find a new home or want to be sure you're maximizing your profits, you could be better off with a mortgaged buyer. It really comes down to the details of the offer, not just where the buyer's getting their funds.

Who buys a house with cash?

Traditionally, cash buyers tend to be concentrated at either extreme of the housing market.

On the low end, they’d pay a low price for a home that might not qualify for a mortgage due to condition, price or both. On the high end, some people buy houses with cash just by virtue of being wealthy. Across the board, cash buyers could include:

• Homebuying companies or franchises.

• Local house flippers.

• iBuyers.

• Investors looking for rental properties.

• Individuals with equity from a prior home sale, such as retirees downsizing or people moving from a high-cost-of-living area to a more affordable one.

Pro tip: When reviewing potential buyers’ offers, consider their history of working with cash. If you get a cash offer from a buyer who's more or less a “regular,” — as in, they’ve bought numerous houses with cash before — it may go more smoothly than if you're working with a first-time cash buyer. Tasks like getting a purchase contract drawn up and securing title insurance are nothing new for regulars.

» MORE: Buying a house in today's market

Investors and iBuyers vs. home shoppers

The category of routine cash buyers includes real estate investors, house flippers and iBuyers. iBuyers are companies that pay cash for homes, provide an offer within days, if not hours, and allow sellers to close in as little as two weeks.

Though investors and flippers will seek out listings, you have to take the initiative when selling to an iBuyer. These transactions promise simplicity: just take a few pictures and request an offer online. Plus, you don’t have to deal with the fuss of home staging or scheduling walk-throughs to entice potential buyers.

» MORE: Pros and cons of selling your home to an iBuyer

Whether you sell to an iBuyer or another type of investor, the individual who signs the deal generally isn’t planning to live in the home. Because they're hoping to profit from buying the house, however, investors may make a lower offer than a buyer who's looking for a place to live.

A home buyer who's buying a house with cash for the first time, whether as a primary residence or a second home, is likely planning to live in the house. This type of buyer may ask for contingencies, like a home inspection. Given that they're already putting out substantial cash on the house, they're less likely to want a property that will need significant upgrades or require major fixes. A property that's safe, solid and move-in ready is a likely expectation for this type of cash buyer.

» MORE: How buying a house with cash works

Why a cash offer may be better than a financed offer

The prospect of a cash offer may have you fantasizing about diving into a pool of money a la Scrooge McDuck, but remember — unless you own your home outright, a good chunk of those funds will be going toward repaying your own mortgage. Still, there are plenty of reasons why cash offers appeal to home sellers.

• Confidence in the deal going through. With cash, the buyer either has the money or they don't — if you've verified the proof of funds, you know you'll be able to close.

• Faster process. Even preapproved home buyers have to get an actual mortgage approval, then go through underwriting. That typically takes 30 to 45 days, or longer for complex situations (like someone who’s self-employed). Closing a cash transaction can take as little as two weeks.

• Fewer contingencies. Cash buyers tend to be less likely to request an appraisal, a home inspection or other contingencies.

• Simpler closing. Cash buyers should take it upon themselves to ensure paperwork is complete and correct. Still, without a lender involved, there's much less to review and sign off on to close the deal.

• No appraisal stress. Lenders require an appraisal before approving a mortgage, since the property is what secures the loan. When home values are rising rapidly, appraisals based on comparable home sales don’t always keep pace, creating an appraisal gap between what a buyer would be willing to pay and what a lender will agree to finance. With a cash offer — and no appraisal — the home's value is whatever the buyer is willing to pay.

» MORE: How home buyers can keep a cool head in a hot market

Why a financed offer may be better than cash

Given all of that, you might assume cash offers always win. But there's more to making an offer on a house than funding. A few variables to consider:

• What's better for your timeline. If you're in a hurry to unload a vacant home or move into a new one, a speedy closing sounds great. But if you're trying to buy while selling, you might want some extra time. Compare the proposed closing dates and timelines among offers to see which works best for you.

• How much money you might be giving up. Even if you're interested in a fast closing, weigh those conveniences against the money you might be leaving on the table.

• What kind of buyers you're dealing with. All of the “cash transactions are generally quicker and easier” points above are more likely to hold true if you're working with an experienced cash buyer. With a first-time cash buyer, you might still have contingencies. If the buyer isn't working with a real estate agent, that can also make the transaction more complicated. In this scenario, having a listing agent who's experienced with cash buyers can be a major asset.

» MORE: How to handle multiple offers

Should you accept an all-cash offer?

Everyone's circumstances are different, so you’ll need to decide what matters most to you. In a hot market, it’s common to receive multiple offers — so a little patience can go a long way if you can hold out for “highest and best.”