Cash offers can fail, just like any other offer. This can happen if a professional home inspection reveals defects, if there are issues with the title to the property, or if the seller doesn't trust the source of the funds. If the home is valued for less than expected, you may be able to bridge the appraisal gap and still close the deal. Unlike mortgage borrowers, cash buyers don't have the same limitations.
If a home is valued for less than the agreed purchase price, it will affect the loan-to-value ratio and the contract is likely to change. The buyer may pay the difference in cash or the seller may lower the price of the home, although this is unlikely in a seller's market. Once both parties sign the offer agreement and deposit the guarantee money, it is sent to the seller's agent who presents it to the seller for acceptance or rejection. If accepted, both parties sign and it's binding.
In years past, about 90% of all purchase contracts were closed, but that number has dropped to only ~ 65% today due to falling buyer financing, poor valuation, buyer falling apart, and home fails inspection contingency. If you find yourself in this situation, you may be able to renegotiate with the seller if, for example, the lot is smaller than expected. When making a cash offer on a home, it's important to consider all of your options and weigh the pros and cons. According to the National Association of Realtors, with fewer properties on the market compared to a year ago, a higher fraction of non-first-time buyers are making cash offers.
A cash offer contains no financial contingency but that doesn't mean that it's free from contingencies. Be sure to consider who is making the offer and what their expectations are. Generally speaking, cash buyers outperform funded buyers because there is less chance that the deal will close and because they can close faster. When deciding whether or not to make a cash offer on a home, remember that just because you have the means doesn't necessarily mean it's the right move.
It's important to consider all of your options before making a decision.
