01 July 2021

If you’re in the fortunate position of having enough liquid capital available to purchase a property without accessing home finance, you’ll find yourself in a position where you will have unique leverage when placing an offer on your dream home. When sellers are faced with a cash offer, they’re provided with the assurance that you already have the means to purchase the home. However, before you make your decision, it’s best to know what a cash offer means and understand the various pros and cons that go along with it.

What is a cash offer?
A cash offer means you’re offering to purchase a property outright using readily available funds. Therefore, you won’t need to acquire any home finance before the transfer can go through. Making a cash offer doesn’t necessarily mean that you have a literal briefcase full of cash as it’s more likely that you have the money readily available in the form of a liquid bank account.

The pros:

1.    You’ll avoid paying interest on a home loan
There are multiple reasons why you may prefer to purchase a home with cash. The most obvious reason would be to avoid being charged interest on your home loan.

2.    Increases likelihood of your offer being accepted
A second benefit is that you’ll have a better chance of having your offer accepted, especially if you’re purchasing within a seller’s market where multiple offers are being made on a home.

3.    A cash offer simplifies the sale process
Due to lenders not being involved, the process of transfer and registration is also likely to go quicker. For this reason, sellers who are in a hurry to sell might be willing to accept a lower cash offer over a higher offer pending home finance approval. This is owing to the greater simplicity of the deal which also allows for a greater likelihood that the deal will not fall through.

The cons:

1.    It can be difficult to save enough capital
It should be noted that even though making a cash offer sounds ideal, you may struggle to save up enough capital to be able to afford a cash offer. As this is not a small sum of money you’ll be needing to save, this may quickly become a stressful task.

2.    You’ll be depleting your savings
After using all your capital to purchase the home, you might not have any savings left to cover any upgrades to the house or emergency expenses. Therefore, if you’re thinking of making a cash offer, ensure that you purchase well within your means and leave room in your savings to cover these expenses.

Seek professional real estate guidance
Each transaction is unique, which makes it helpful to have the experience and guidance of a real estate professional at your side. Whether you are buying or selling, your real estate agent is there to help you navigate through any uncertainties and complete a successful and stress-free transaction. Their guidance can prove invaluable in avoiding any mistakes along the way.

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