Investors who purchase real estate using cash add liquidity into the real estate market, and this liquidity fluctuates based on real estate market trends, such as pricing and availability, and financing characteristics, such as interest rates. However, cash buyers real estate benefits both buyers and sellers.
Buyers’ Benefits
Real estate buyers are able to close on cash properties much quicker, in days rather than weeks, than financed properties. In addition, these investors do not have to rely on financing companies to determine what properties they can purchase. They also reduce their closing fees, and although they forfeit the mortgage interest tax deduction, they eliminate the interest rates they would have to pay to mortgage companies.
Cash buyers have greater flexibility and negotiation power, and many are able to purchase properties for as little as 65% of their value. This allows these investors to complete minor improvements and resell the property quickly, often for a significant profit.
Some properties are challenging to finance because they have title issues or need repairs. Different types of properties, such as unfinished rehabilitation projects and condo-hotels, may also be difficult to finance. In addition, a foreign buyer may have difficulty gaining financing despite having a high net worth. Finally, cash buyers can waive inspections, appraisals and property surveys.
Sellers’ Benefits
Sellers also benefit from quick closings, and they do not have to worry about the buyer backing out due to financing issues. Sellers also keep all the money from the sale because most do not have to pay agent commissions.
These sellers are also able to sell challenging or less than desirable property, including property from an expired listing. They may also sell damaged or vacant homes without completing repairs, extensive cleaning or sales preparations.
Both buyers and sellers experience significant benefits when properties are purchased using cash. Therefore, if you need to sell your home quickly, consider targeting cash buyers with your marketing efforts.
