When it comes time to submit an offer on an NYC apartment, how much cash you can put down can make a big difference in how your offer is perceived. Those who can submit an all-cash offer immediately gain an advantage over those who are financing the purchase. This can be very valuable in a hot market where there is a lot of competition. All-cash offers are great for sellers; it means the deal is a sure thing and will close a lot quicker.
For buyers, they stand to get a lower sales price. But how much you can save depends on each listing. Some sellers will prefer a financed buyer if it means a higher sales price. Here’s what you need to know about making all-cash offers in NYC.
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What is an all-cash offer?
An all-cash offer is when a buyer has all the funds available to make a home purchase on their own. They don’t need a mortgage from a lender or bank to complete the sale.
What are the advantages of all-cash offers
Cash is king in real estate. When it comes to competing against other buyers, it’s hard to do better than an all-cash offer. What makes all cash offers so attractive for sellers is that they don’t need to worry about mortgage approval. They know the deal will close with the least amount of risk and in a shorter time as there is no third-party involved. The risk that comes with a mortgage-backed buyer is the home appraisal. If the property is appraised for less than the purchase price, then the buyers may be forced to make up the difference. If they can’t do that they may demand that they pay only the appraised value or walk away. The mortgage contingency in the sales contract will allow them to do this and without fear of losing their deposit.
To be clear, an all-cash offer doesn’t mean the buyers will be showing up on closing day with a suitcase full of Ben Franklins. It just means they don’t need the assistance of a bank or lender. Speed is the biggest thing a cash buyer can advertise. This allows the sellers to sell more closely on their own terms. There’s no need for an appraisal from the bank or lender. Home inspections while still done (and recommended) can be skipped. The sale can take place as fast as the title company can get the paperwork together. All-cash offers will also not include a mortgage contingency in the sales contract. That means that should the buyer fail to show up on closing day with the money; the seller can keep the buyer’s 10% deposit.
How likely a seller is to accept an all-cash offer depends on their circumstances. For instance, let’s say the seller has an imminent job transfer to another city and needs to sell ASAP. They’re far more likely to accept a lower offer price if it means a sure and quick sale. But what if the seller is in no rush to sell and wants to make a gain on the sale? They’re more likely then to prefer a larger offer even if it’s financed.
What are the disadvantages of all-cash offers
The main disadvantage to all-cash offers is that you’ll have less leverage once the sale is closed. The high price of real estate in NYC means you’ll need a large amount for an all-cash offer. This can leave you with less post-closing to spend on renovations compared to if you had taken out a loan. You’ll also want to factor in buyer closing costs when deciding whether an all-cash offer is a correct choice.
Are all-cash offers non-contingent?
Not necessarily. While there won’t be a mortgage contingency there can still be a Hubbard contingency. This is a contingency which requires you to sell another property before you can close on this one. If your all-cash offer has a contingency, then it is far less beneficial to the seller. The benefit a faster closing time, making them less likely to accept a lower offer.