It takes a lot of money to buy a home these days. In California, the average house is currently valued at $747,352… which is actually down nearly a percentage from a year ago. And with decreased inventory in most metros, the competition for homebuyers is hotter than ever. So if you’re in the market to buy a home, how can you gain an edge?

One way is the old adage: cash is king. While many homebuyers rely on mortgage financing to buy a home, making an all-cash offer on a property can offer numerous advantages – including vaulting your offer to the top of the stack. After all, only about 10% of new home sales are sold to cash offers according to recent census data.

Now couple that fact with this one: “buyers who offered an all-cash transaction were four times more likely to win in a competitive offer situation than those who didn’t,” according to Redfin (via NAR, emphasis ours).

So why is cash so powerful? And how can you make an all-cash offer? Let’s dive in.

Increased Negotiating Power

Cash buyers are attractive to sellers because they eliminate the uncertainties associated with mortgage approval and the potential for deals falling through. Because of this, sellers may be more willing to negotiate on the price, closing costs, or other terms when presented with an all-cash offer.

When a cash offer is on the table, the deal won’t be contingent on the buyer securing mortgage financing, thereby eliminating the risk of the sale falling through due to loan approval issues. Contingencies, such as home appraisals and loan approvals, can often become points of contention during negotiations. By removing or reducing these contingencies, cash buyers simplify the transaction and reduce potential sources of dispute, which can make the negotiation process smoother and more amicable.

Additionally, cash buyers have greater flexibility when it comes to terms. They can offer a swift closing if that suits the seller’s needs, which is often a significant advantage. Alternatively, they can propose a delayed closing if it aligns with the seller’s requirements. This flexibility can be a valuable negotiating tool and allow buyers to cater to the seller’s preferences.

Faster and Easier Transaction

Buying a home for cash streamlines the entire transaction process, making it significantly faster and easier compared to traditional mortgage-financed purchases. When purchasing with cash, there’s no need for the buyer to go through the time-consuming steps of credit checks, underwriting, and waiting for the lender’s approval. This not only eliminates a significant source of delay but also reduces the administrative burden on both the buyer and seller.

With cash-in-hand, buyers can close the deal in a matter of days, or even sooner if both parties agree. This expeditious timeline is particularly appealing to sellers who need to sell quickly or have a particular closing date in mind.

Also, buyers and sellers alike benefit from reduced documentation, eliminating the need for extensive paperwork related to mortgage applications. This makes the process easier to manage, less prone to administrative errors, and more pleasant overall.

Cost Savings

Everyone likes to save a buck, and we all know that the costs of buying a home with a mortgage can add up significantly over the life of the loan. By eliminating this and other associated expenses, cash buyers can save a substantial amount of money in the long run.

One of the most prominent advantages is the elimination of interest payments on a mortgage. This can result in substantial long-term savings, as interest payments can add up to a significant amount of money, especially over a 15- or 30-year mortgage term. According to a study out of the University of California-San Diego, cash buyers paid about 12% less than those using a mortgage.

Cash buyers also avoid the various costs associated with obtaining a mortgage, including loan origination fees, appraisal fees, and costly private mortgage insurance (PMI) if the down payment is less than 20%. These expenses can amount to tens of thousands of dollars, which cash buyers completely bypass, saving them a considerable sum at the time of purchase.

Finally, cash transactions often entail lower closing costs. Lenders typically charge fees for processing and closing the mortgage, which can be notably high. In cash purchases, these lender-related costs are non-existent, leading to immediate savings for the buyer. Additionally, the absence of a mortgage can reduce the need for certain insurance premiums or escrow accounts, further trimming the overall cost of the transaction.

Reduced Risk and Financial Freedom

Sure, sometimes you can have “good debt,” but that’s a rarity today due to the high mortgage rates. Today, a debt-free home offers significant peace of mind and financial security. Without a mortgage to worry about, homeowners are less vulnerable to economic downturns, job losses, or interest rate fluctuations. They have the flexibility to allocate funds to other investments, savings, or opportunities, enhancing their overall financial freedom. This financial resilience can be particularly valuable during challenging times.

Cash buyers also have the freedom to make homeownership decisions without the influence of a lender. They can choose to make home improvements or renovations without seeking lender approval, which can increase the value of the property and improve their living conditions. Additionally, they can opt for different insurance policies or property tax payment schedules that may better suit their financial preferences and goals.

How You Can Make an All-Cash Offer with Forward

Obviously, if you have the cash to make an all-cash offer, you probably should. Easier said than done. Not too many households in the US have hundreds of thousands of dollars in cash just sitting around. But that doesn’t mean you’re out of luck.

Zoom Casa has helped thousands of families become non-contingent home buyers through our Forward program, helping them become free and clear of a previous mortgage so they can make cash offers on their next dream home.

Learn more about how you can become a cash buyer for your next home using Forward. Book a free 15 minute consultation with us today.