Why You Lost to a Cash Buyer
So, you’ve made a very competitive bid on a house. Maybe you even went higher than the seller requesting thinking that the home of your dreams is in the bag. You wrote a brilliant letter explaining why you are the perfect person to buy the home. You’ve promised closing in 30 days and took the home “as is.” Your mortgage loan officer says you are good to go.
Most of the time this is a very compelling offer that would generally be accepted by the seller. This time though, a cash buyer rode in and made an offer less than yours by as much as $10,000. You’re a shoe in, right? That’s not always the case. Your agent calls you and lets you know that you just lost to a cash buyer. So, what happened?
Benefits of a Cash Buyer
Cash buyers can close much faster. Heck, if they really wanted to they could nearly close the same day. The owner doesn’t have carrying cost at this point like, water bill, tax bill, next payment, interest, etc. There is some decent savings there depending on the price of the house.
Other benefits to the seller are a near guaranteed closing. Many times a closing is based on a 30 day period, but more often than not it never closes on time. This is almost always because of the mortgage process. Banks aren’t in a hurry. They will asks for information throughout the process and often you’ll find yourself closing weeks later than the initial closing date. 2 Weeks isn’t such a big deal in the scheme of things so what else does a cash buyer offer?
When you write a contract not only do you add a closing date, but you also have mortgage contingencies. For example, the contract can be voided if you are unable to get a mortgage. Also, you can even specify an interest rate as a reason for voiding the contract. Maybe throughout the process you found that .5% interest rate increase over what you expected with a pre-approval used you to be unable to afford the home.
What Does this Mean for the Seller?
The seller has much less risk. If it takes 30 days to find out that you can’t sell then they have have to find another buyer. Also, they will have to pay for those carrying costs for another month. Maybe something happened that could lower the value of the home or caused damage (think flooding, hail damage, etc.). This is why they chose the lower cash offer with a quick closing over your higher offer.
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