Buy with Cash Only

It is not uncommon to come across the words Cash Only in MLS listings.  This may seem self explanatory, but a short explanation of what (and why) this is, may be helpful for some home buyers.

What does Cash Only mean?

The short answer is: Cash Only = Cash Only

This means that you, the buyer, have the liquid assets (ie cash) to buy the property without a loan from a bank or other lender (ie hard money).  If you are borrowing money from anyone (a family member, a private lender, hard money lender, etc), then you are not a true cash buyer.   You might be able to still make an offer as a cash buyer, but if you are borrowing money from someone ( ie a family member or private lender but NOT a bank) you will need to disclose this and the financing contingency will not be in force.  This means your good faith deposit will be at risk should the third party lender not lend to you for any reason, so be very, very careful if you say you are a cash buyer when the funds are not your own.  Check with your Realtor to make sure you can make a cash offer when the funds are not yours.  State laws vary on this and your Realtor will have to use the correct purchase offer form to protect you.

You will need to show Proof of Funds via bank statements as evidence that you have the cash available to cover the purchase.  This POF will need to be submitted with the offer.  It will need to be a recent statement (or combination of statements) that show you have the cash in the bank available now to close the deal.

Why do sellers want Cash Only offers?

There are several reasons why a seller might ask for Cash Only offers.  One of the main reasons is that the house might not be able to be financed due to several potential issues.  It may have open permits, unpermitted work, liens, non-livable conditions, etc.  The seller may also just want a fast and secure deal.  Any financed deal has the potential to fall through and a cash deal is a much more sure thing to a seller.  They may be willing to accept less for a sure thing.

Why do buyers want to buy with cash?

Many choose to do so because of the current lending environment.  Loans are tough, take a long time and appraisals are notoriously and unrealistically low.  Buyers know what they want and don’t want to go through the hassles of the bank.  They are confident in the market and their purchase and feel that a cash deal is better and quicker. Sometimes, it allows them to buy a home that can only be purchased with cash due to the condition, as mentioned above.

Is the Seller flexible on Cash Only?

Normally not.  By saying a property is cash only, the seller has severely limited their pool of potential buyers so they have a serious reason for doing so.  If you are a cash only buyer, this means there are great opportunities for you due to the decreased competition with other buyers.

Remember, Cash is King when it says Cash Only

buying with cash

window sign image by me and the sysop

cash bundle image by JMRosenfeld

How many homes in Coral Gables were bought cash last year? Read my blog and find out here.  Do you get a better price if you buy cash? Read this blog and find out here.

{ 5 comments… read them below or add one }

Mark Walker October 14, 2010 at 3:33 pm

Funny enough in Canada there is not much difference between cash and bank deals.

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janiecoffey October 15, 2010 at 6:53 am

here, because financed deals are so shaky, a cash buyer is seen a superior, solid buyer. Sellers will often be willing to sell at a lower price for the peace of mind that it will, indeed close.

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Thomas Gamble January 31, 2011 at 9:55 am

I will soon be moving to Florida. I originally assumed renting would be the way to go, but considering the low priced condos (forclosures) I now want to buy an investment property. I have enought cash, but I don't have time. I will be moving in a month. Once I choose a home, what are the steps to buying it with cash? How fast can it take place, realisticaly? What fees will I be expected to cover? I know this is a lot of questions. I hope you have a moment to answer them. :-)

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Maria Luisa March 14, 2011 at 10:50 pm

Janie,

What an interesting article. I always wondered why people would limit themselves to cash buyers. Now I know. Thanks.
My recent post Designing the MansionJunior instead of the MacMansion

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endkaos April 23, 2013 at 4:28 pm

If a seller is asking for cash only…the buyer may be left with a lien on a property they just bought. Make sure, you as the buyer, are the ones picking the title company.

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