Do cash offers ever fall through? (6 Reasons We See)

Yes cash offers can fall through but at a drastically lower rate than other offers. Let me explain why and how a cash offer are so likely to close.

A cash offer and conventional offer will both generally contain what is called an “inspection period.” This is the period of time where the Offeree (the Buyer) is entitled to do their inspections of the property. Typically this period of time ranges from 2-3 weeks and during this time the Offeree can legally terminate the contract (“offer falling through”) even though you signed a contract. In all 3 example offers and 99.9% of offers there will be an inspection period, however the difference between a (1) cash offer and (2) conventional offer or (3) FHA offer is that offers 2 & 3 are both contingent upon financing whereas the cash offer is not contingent upon financing. Why this is important is because with a cash offer once the inspection period is over the Buyer cannot legally back out of the contract, thus making the likelihood of the offer “falling through” before closing drastically less than a conventional offer.

Is a cash offer on a house better?

Absolutely! Assuming you are able to get an offer of fair market value for your home, which is the value relative to its current conditions (roof, kitchen, bathrooms, etc.) AND that offer is a cash offer.

Yup you completely knocked it out of the park and could not have done better with the sale of your home. Why is that you might ask ? Well the ease and simplicity of a cash offer is what makes it so attractive relative to another offer such as a conventional offer or First Time Homebuyer (FHA) offer. A cash offer means the offer is not going to be contingent upon the Buyer obtaining and the bank approving the purchase price.

Does a cash buyer actually pay with physical cash?

No, actually it’s not even possible whether selling a home as is or selling with a conventional offer due to Federal and State regulations as well as banking regulations related to Anti Money Laundering purchasing a property with physical cash is no longer permitted.

How quickly can a cash buyer complete the sale?

Depending on the experience of the cash buyer we would say 7 business days is the fastest. Granted we’ve closed a purchase in 6 days before, everything has to go perfectly for this to take place and usually that is not the case. We aim for a 21 day closing, which is still 29 days faster than the 50 days on average it takes according to rocket mortgage who is one of the largest home lenders in the country.

Are there closing costs on a cash offer?

Yes, there are closing costs on a cash offer. However they are generally about 0.5-1.5% less than the closing costs for a traditional offer. But as the Seller whether the offer is cash or not would not affect the Seller’s closing costs unless the offer also included that the Buyer would cover the closing costs. In that scenario there would be “no closing costs” but that is a term the Buyer must include in the offer or both Buyer and Seller would be responsible for their own closing costs.

Do you need a home appraisal when you pay cash?

Nope ! And that’s probably one of the greatest benefits of a cash offer that no one other than the Buyer can say what the price will be. Selling a home as is or traditionally is hard enough and the more parties who are involved in the transaction such as a bank and appraiser the more opportunity for the original deal made by the Seller and Buyer to change along the way. Appraisals coming back lower than the original offer from the Buyer is also more common when the home is being sold as is.

What is the likelihood of a cash offer falling through?

As long as you’re dealing with a reputable cash buyer we’ve seen that only 1.4% of Florida homes where we sign a cash offer on and pass inspection period end up falling through. Based on our industry research of the major metro areas that we also purchase homes in, the average is closer to 3%. This is still dramatically less than the recent 24% likelihood a conventional offer or FHA offer will fall through based on Redfin research

The Six Most Common Reasons Cash Offers Fall through

  1. Issues with Title that cannot be cleared – This can include things like judgments from credit card companies or other creditors; liens from the county or municipality; probate and non cooperative heirs. We pride ourselves on getting deals to the finish line no matter how messy the issues are but every once in a while the issues are just a bit too much.
  2. You were not dealing with the end buyer – Dealing with an intermediary who never had any intention of purchasing the property but was searching to find a buyer who would purchase it.
  3. Drastic change in the market since the contract was signed – Recently, when COVID-19 was first declared a national emergency many buyers backed out of their offers citing the national emergency/act of nature clause in most contracts.
  4. Past due taxes – The Seller was unaware of the taxes owed and does not have the money to come out of pocket and pay the taxes and the Buyer is unwilling to increase the offer.
  5. Contingencies on the offer – Most commonly, an offer contingent upon the Buyer selling their current residence because they were going to use the proceeds from the sale to be able to purchase this home cash. If they can’t sell their current home they don’t have the cash to move forward with the purchase.

What Can You Do to Prevent a Cash Offer from Falling Through?

  1. Ensure You Have a Clean Title – Work with a cash buyer who will use an attorney as the closing agent, attorneys are more creative in getting the closing to the finish line than a title company.
  2. Ensure your home is in good condition – Make any repairs that the buyer might be citing as a reason to cancel the offer.
  3. Ask for Proof of Funds – Ask for a recent bank statement showing sufficient funds to purchase your home cash.
  4. Speak with your tenants – If the offer is contingent upon the home being vacant , make sure the tenants are out of the property at least 7 days before the closing date with the Buyer because tenants always need more time so this gives you a little buffer time.
  5. Work with an experienced cash Homebuyer – They should be just as excited to purchase this property as you are to sell it. Ask for references of the properties they purchased in the last 6 months with the address so you can look it up.

Conclusion

There is always a chance an offer is going to fall through, but hopefully this article provided some insights into why cash offers fall through so much less than conventional or FHA offers.

Additionally, although it happens less frequently it is possible for a cash offer to fall through but the odds are definitely in your favor that it won’t fall through if you work with a reputable cash buyer with a track record of closing on the offer.

Remember, anyone can make you an offer on your home but only a reputable cash buyer will be able to close the transaction in the period of time promised.

If you want an all cash offer or a second opinion on an offer you already received, fill out the form below. We are one of the largest all cash buyers in the entire country.

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