Why Cash Offers Aren't Always Better
The appeal of a cash offer is understandable: no financing contingency, no appraisal requirement, faster close, and higher certainty. But most cash buyers — particularly institutional buyers and iBuyers — price that convenience premium into a lower offer. The question is whether the simplicity is worth the discount.
The Net Proceeds Calculation
A $350,000 cash offer vs. a $380,000 financed offer: on the surface, the financed offer is $30,000 better. But the financed offer takes 45 days to close instead of 14, involves an appraisal risk (if it appraises below $380K, you may need to renegotiate), and carries a small risk of the loan falling through.
If you need the cash urgently, are moving to another state, or the property has condition issues that might tank a traditional appraisal, the cash discount may be justified. If you're not in a rush and the home is in good condition, push back on the cash offer price or counter with your financed-offer price.
Evaluating Institutional Cash Buyers
iBuyers (Opendoor, Offerpad) and local "we buy houses" investors operate on different margins. iBuyers typically offer 88–93 cents on the dollar with convenience fees. Local investors targeting distressed properties may offer 60–75 cents on the dollar. Traditional financed buyers on well-priced homes regularly close at 97–102% of list price.
The right answer depends entirely on your situation, timeline, and the condition of your home. A seller with a fully updated home in a liquid market gains little from accepting a cash discount. A seller with deferred maintenance, code issues, or an urgent timeline may find the tradeoff worthwhile.
Red Flags in Cash Offers
Be cautious of: "subject to" offers (buyer takes over existing mortgage — rarely appropriate), offers without proof of funds, extremely short due diligence periods (under 5 days) designed to prevent you from shopping the offer, and buyers who won't disclose their intent (assignment contracts or wholesalers flipping the contract).
Novation: A Third Option Many Sellers Don't Know
A novation agreement — sometimes called a "partnership listing" — is a structure where you enter a formal agreement with a buyer before listing on the MLS. The buyer locates a retail buyer to purchase the home at market value and the proceeds are shared according to the agreement. This can deliver close-to-market value with speed and certainty similar to a cash sale.