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All Cash Buyer

Mike Ciunci
Nov 7 4 minutes read

Today's real estate journey can be tricky. Especially as we are shifting closer to a normalized market. However, purchasing can still be very competitive in the West Chester Area School District. "I was beat out again by an all cash offer" isn't always what it sounds like. If I could place a rough percentage, a true cash offer only happens 10% of the time. Roughly 90% of my sellers who accepted "all cash" offers were not truly all cash.  



This is what "All Cash" really means in most cases

▶️ Buyers are waving their mortgage contingency 

▶️ Along w/ the mortgage contingency, the appraisal contingency is eliminated

How does this work and what should I (as a buyer or a seller) do and expect in these scenarios

Buyers Should

💡Consult w/ their lender about risk/reward of waiving the mortgage contingency

💡Consult w/ their realtor about what normally happens from previous experiencesSellers Should

💡Still expect an appraiser to come through the home

💡Ask questions such as what happens if the buyer defaults on their mortgage

💡Feel good that the buyer is willing to inherit some risk 

There seems to be confusion on both ends as what "waiving the mortgage" really means if the buyer doesn't actually have all cash to buy the home outright. Since buyers are waiving the mortgage w/ the intent to still get a mortgage, what exactly does that look like. 

In a nutshell, the buyer is essentially giving the seller a "NON-REFUNDABLE" deposit. This protects the seller in the event the buyer defaults on their mortgage. Or maybe the home underappraises to the point where the buyer cannot make up the difference.

This is why as a seller in situations like this, it's very important to negotiate a large up front deposit as well as tighten up the delivery date of the deposit from 5 days to 1 day. That deposit is the one tangible item that binds the buyer to the seller. So if the buyer does default on the mortgage (rare), the seller can take the deposit as a cushion or as retribution (however you want to look at it)



Overview:

When working w/ a buyer who falls in love w/ a home that will be a competitive situation, AND wants to waive their contingencies (as a method to be competitive), I always ask, "is this home a 10 out of 10"? Since there is some risk involved, and in my opinion, it doesn't make sense to take on the risk unless you absolutely love the home.

In my experience with West Chester home sales, I can thankfully say, there has been very little to almost no issues with buyers waiving the mortgage/appraisal contingencies. Most local West Chester appraisers i've worked with understand the market values have increased and have made adjustments to accommodate. So, if you're a buyer in today's market, most likely you are not getting beat by all cash offers. You are getting beat on a strategy.

As a seller in today's market, leveraging the buyer to waive their mortgage contingency option in the event there is high interest puts you in a position of power. This eliminates flakey buyers and their large, upfront deposit is your insurance plan.

An experienced agent has been in every type of scenario and can give great advice on your options and what to expect. I always like to say, "you don't know what you don't know". In an ever changing market, new developments call for new strategies.

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