This article fully answers the question, “What is a cash offer on a house?”
By using my expertise as a professional cash house buyer and real estate investor, I’ll define the term and work through a detailed timeline that tracks how cash sales work.
Let’s all start on the same page and define the term “all cash”.
All Cash Offer Meaning
What does an all-cash offer mean? An all-cash offer means your buyer has cash to pay for your property and doesn’t need a mortgage to buy your home.
All buyers typically must have some cash to commit to a home purchase to qualify for a mortgage, but few buyers have enough cash to pay the entire sales price without obtaining some sort of loan.
The typical home buyer brings only 10-20% cash of the sales price for a down payment, but cash buyers pay 100% cash to close the deal. Cash buyers also pay cash for closing costs.
Nothing is financed in an all-cash sale.
All Cash Offer Example
The two main groups of cash buyers are former homeowners and real estate investors.
Buyers with a lot of cash from a previous home sale are one group of all-cash buyers.
With record home appreciation, more and more buyers are transferring the cash from their home sale into new home purchases.
This category of buyers typically uses a real estate agent (often called realtors) to purchase a home, and that means the seller pays the commission for the buyer’s agent (in addition to the one of the seller’s agent).
Another group of all-cash buyers are investors. Investors bring cash to pay the sales price, and they also typically pay their closing costs and the seller’s closing costs in cash.
This group generally doesn’t use a realtor for the transaction. That means the seller isn’t on the hook for the 2.5-3% commission fee to pay the buyer’s agent.
Real estate investors are as knowledgeable about the real estate sales process as agents. Those who offer cash house buying services usually advertise a transaction without agents and no agent commissions.
That’s why oftentimes home sellers skip hiring a seller’s agent if they are selling to an investor — this saves them the seller’s agent commission, too.
If you want to find such a real estate investment company serving your area, look at this list of the best local cash house buyers.
Or, request a cash offer right away — your request will be sent to a few local companies so that you can compare their cash offers and choose the best one.
Let’s outline how an all-cash sale to an investor works:
- A seller contacts a cash investor with a sale price in mind.
- An investor visits the property, makes a cash offer, and both parties agree on a final price.
- The parties sign a real estate sales agreement.
- An investor opens escrow by using a title-escrow company. They place a set amount of cash into escrow to begin the sales process. This is called an earnest money deposit. Its amount is agreed to by both seller and buyer.
- A title company conducts a title search to make sure there are no problems with the home’s title and that ownership can be fully transferred to the buyer.
- On a set day, closing is conducted. Both buyer and seller then sign the final documents. The investor normally pays the home buyer’s and home seller’s closing costs. Some states require a real estate attorney to close the sale, but most investment companies have an attorney on staff to do that duty. The rest of the funds are transferred to the seller, and the sale is closed.
- A seller then receives a check or bank transfer through the escrow-title company.
When selling your house to a real estate investor, the whole process may take just one or two weeks provided your house doesn’t have legal problems (such as title issues or liens) attached.
Final Words
This article defined the term “all-cash offer” and also outlined the typical steps in this type of sales transaction.
If you accept an all-cash offer for your property, you’ll now know the steps involved in closing the sale. Additionally, learn about the pros and cons of a cash offer and how to get a cash offer on your house.
