What is the Difference Between An All Cash Offer & Financing

What is the Difference Between An All Cash Offer & Financing

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Investing in real estate involves a lot of spinning plates at once. You need to know how to market properties, which kind of investment model to use under what circumstances, local market conditions, and more. On top of that, when an offer comes in on a property you are looking to sell, you need to understand the advantages and disadvantages of different kinds of sales. Many investors with mature portfolios accumulate the working capital to make cash offers on properties, but all cash also tends to come with a slightly lower offer price in many cases.

Should You Sell To A Cash Buyer Or Finance Buyer?

The decision to sell for cash has a few distinct advantages, but it comes with lower return margins a lot of the time. It is also less likely to fall apart before closing because cash in hand means there are no financer conditions to meet before the property qualifies. As a result, cash buyers are often looking to take properties as-is and then improve them. If you have put a lot of work into the property already, cash buyers may be less attractive because the cost of the work you have done might eat up any gains you make in price. As with many things in real estate investment, it depends on the situation and your skills with figuring out what to say to cash buyers to maximize the offer.

Pros and Cons of a Cash Offer vs. Financing

If you are looking for a way to assess an individual offer or to compare a cash offer against one that has to wait for financing, it helps to consider the upsides of each arrangement. While cash buyers are frequently looking to come in a little low, they do bring a lot to the table.

  • When you know how to find cash buyers for wholesaling you can buy and sell properties without any investment in improvement
  • Closing is fast, uncomplicated, and involves as streamlined a process as you agree to
  • Moving as-is properties in need of heavy improvement is easier when there is no loan to underwrite
  • Selling at volume is easier when you deal with cash buyers because closing takes less work

Finding cash offers can be easy if a market is hot, but if you are ahead of the learning curve you have to know where to find buyers. Luckily, there is a real estate buyer leads list free as a sample from most lead generating services and software packages. The idea is to show you the quality of the leads the service can find so you will buy a paid lead package later. So what are the advantages of going with a financed sale?

  • Buyers tend to offer more because they only put up a portion of the capital needed for the purchase
  • You still receive your cash in a lump sum after closing, you just receive most of it directly from the financing company
  • Reliable and vettable closing methods to ensure a quality transaction on both sides
  • Financed buyers can competitively bid by increasing the cash down payment, so they are great in hot markets

There are obvious times when each method has its high points, but mostly it comes down to a question of what you need for returns. If you have put a lot of work into a property, you want a bigger return than if you just buy and hold it for a bit. Use that as your guidepost when you’re deciding.

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