Cash Offer vs. Traditional Financing: What’s the Difference?

If you are selling your house, cash is king. Here’s why: when a buyer has cash in hand, they aren’t jockeying for bank financing. Which means their cash is a sure bet. Traditional bank financing is not a sure bet. In fact, a potential buyer’s financing can fall through at any point—right up until closing.  

To obtain traditional financing, a buyer must survive the mortgage process. Anyone who has been through it will tell you the process involves a grueling amount of paperwork. The bank wants to know, for certain, that lending money to the person (or persons) applying for a loan is a good financial risk. Things like making a major purchase (like a car) or experiencing a change in employment can knock a prospective buyer out of the mortage approval process. A vast array of factors can make banks raise their eyebrows and back out of a loan, so going with a cash buyer for your property is a safer, more straight-forward bet.  

If you need to sell your property as-is, a cash offer may work out better than traditional financing. Property must meet certain criteria for a bank to fund an FHA loan. Investopedia notes that a home loan can be denied over any of the following: 

Electrical and Heating: The electrical box should not have any frayed or exposed wires.  All habitable rooms must have a functioning heat source (except in a few select cities with mild winters). 

Roofs and Attics: The roofing must keep moisture out and be expected to last for at least two more years. The appraiser must inspect the attic for evidence of possible roof problems. The roof cannot have more than three layers of roofing. If the roof does not meet this criteria, the FHA requires a new roof. 

Water Heaters: The water heater must meet local building codes and must convey with the property. 

Hazards and Nuisances: A number of conditions fall under this category. They include but are not limited to the following: 

  • Contaminated soil 

  • Proximity to a hazardous waste site 

  • Oil and gas wells located on the property 

  • Heavy traffic 

  • Airport noise and hazards 

  • Other sources of excessive noise 

  • Proximity to something that could explode, such as a high-pressure petroleum line 

  • Proximity to high-voltage power lines 

  • Proximity to a radio or TV transmission tower 

Structural Soundness: Any defective structural conditions and any other conditions that could lead to future structural damage must be remedied before the property can be sold. These include defective construction, excessive dampness, leakage, decay, termite damage and continuing settlement.  

Asbestos: If an area of the home contains asbestos that appears to be damaged or deteriorating, the FHA requires further inspection by an asbestos professional. 

Bathrooms: The home must have a toilet, sink and shower. (This requirement might sound silly, but you’d be surprised what people will take with them when they’re foreclosed on, and what vandals will steal from a vacant house.) 

If any of this sounds all too familiar, consider selling to a real estate investor. They can buy your house as-is, for cash. No appraisals. No bank loans.  

Buyers going through a traditional funding process will need at least 6-8 weeks to complete the process and get their loan. If you sell for cash, you can quickly. Sometimes in as little as 2 weeks. If you work with an investor, you can often set the closing date. And they typically pay all the associated closing fees.  

If you want a sure bet, that isn’t contingent on appraisals & inspections, and you want to close quickly, consider selling your house to a real estate investor for cash.  
 

 

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