Home Buying Tips 2022: All Cash Offers

They are not as prevalent as many think. Some are simply upfront hard money loans.


One of the main misconceptions most homebuyers entering the market have is that they will be competing against mostly all cash offers. This is not the case most of the time in the East Bay, although there are typically 1-2 cash offers per house. Some receive more than others, but those tend to be magazine worthy homes or real fixers.


Why are all cash offers usually preferred?


It means the seller doesn't have to worry about 2 out of 3 potential contingencies, appraisal and loan, that could affect the deal from closing. The closing timeframe is shorter as well since it's really a matter of how fast can you move the cash into escrow and have the staging removed. In the end, it means that the buyer is more likely to close without any issues.


All cash offers do not automatically win.


The actual offer price is still important as about half of all cash offers tend to be less competitive than those with loans as they hope they'll get a discount using cash.


Are there really that many people out there with that much cash lying around?


Yes and no. We are in the Bay Area where there's a lot of tech and bio-tech money, but nowadays not all cash offers are actually cash that the buyers have. Some lenders are offering "cash offer loans" where they buy the home with cash in their name for the buyer and then sell the home back to the buyers at the same price, plus a fee usually about 1% with their financing. To the seller it looks like a simple cash purchase and to the buyer it's an additional fee and time.


This option can be very useful depending upon the situation, but it's always worth investigating as an option that you can keep in your back pocket.