Weighing all-cash versus mortgage-contingent offers
Put another way, how should a seller compare and respond to an all-cash offer versus one requiring bank financing?
In these days of increased competition over well-priced properties, it’s not uncommon to receive a flurry of offers in the first few weeks of a listing. Aside from following the tried and true advice of never ignoring these initial offers, and overcoming the concern that they mean the property’s priced too low, managing the offers can be tricky, as you are rarely comparing apples to apples. Here are some questions to ask yourself during their evaluation:
- Do those offers requiring financing land in the jumbo or conforming loan category? The latter have a higher chance of closing with fewer complications.
- Are the buyers willing to waive the mortgage contingency?
- What is the down-payment amount that the buyers are offering? How far of a stretch is that for them?
- When are they willing and/or able to close?
- What is their credit / financial profile overall? What complexities are involved, such as foreign nationals, the gifting of money, limited history at the current job or a very high bonus component?
- Are you lucky enough to get offers above “market” or what comps would otherwise show? If so, a lower appraisal value may well hurt the financed offer – check out your options if your appraisal value comes in below the contract signed price.
Cash is gold in today’s credit markets and can speed up the time to closing by 1-2 months. Weigh your options, but don’t get blinded by a few extra thousand dollars at the expense of the deal falling apart.
