You’ve probably heard about how cash is king when it comes to real estate. Sellers love cash offers because they typically close faster (as little as 7 days in some cases) than the average of 45 days with a financed offer. According to Redfin, all-cash offers are three times more likely to be accepted by the sellers. This popularity is because there won’t be a financing contingency to hold up closing.
However, there are reasons that even closing an all-cash offer can get delayed. Here are the 8 most common reasons why. Some of them are specific to all-cash offers, while others can pop up on a financed offer, but can get overlooked in the excitement of buying a house with no external financing.
Financing issues (even on an all-cash offer)
Yes, even all-cash offers can and have run into financing issues. They just aren’t issues with a lender. Many cash buyers draw their cash offers from investment or retirement accounts. It has happened that the economy takes a tip and there is suddenly less money in the account than expected.
What happens much more often than the stock market taking a sharp dip is wire transfer delays. It is important to note: Wire transfers take longer than you think. Many factors come into play when wiring money. Wire transfers from a foreign bank or a stock brokerage account can take 7-14 days depending on the institutions the transfer is going between and how much money is being transferred.
Before making an offer, ask your financial institution how long wire transfers take and plan accordingly. This way, you have access to all of your funds sooner, and the deal can close sooner.
It is very common to hear that cash offers can waive a bunch of contingencies, which sweetens the deal for the sellers because it shortens the closing window. Inspection contingencies are the most common because it is part of the due diligence on the buyer’s part.
Title issues are uncommon but can happen, nonetheless. When a title company looks into the property’s title, they check for who has legal ownership of the property, as well as any liens, outstanding taxes, or missing inheritors. This is to make sure that you, and only you, will own the property. Even with an all-cash deal, an issue with the title can hold up the closing process.
Doc and deed delays?
Documentation and deed delays often boil down to paperwork getting backed up and taking a little longer to get processed and recorded. This is especially true during the era of COVID-19 where local government offices and loan, title, and escrow companies can get backed up due to understaffing and/or heavier workload.
Tax issues for both the buyer and seller can hold up the closing process, but more so on the buyer’s side. Outstanding taxes, legal fees, or other legal obligations show up on your credit report and earnings information. If they are left unpaid, it can stall the closing process until they are rectified.
Closing costs surprise buyers across the price range spectrum. They tack on an extra 2-5% of the selling price. Hopefully, there is enough cash budgeted to cover the costs. With an all-cash offer, you eliminate lender fees, but you can still be on the hook for the 2-3% remaining closing costs. If there isn’t enough money, the closing will stall until financing is sorted out—whether that is through a lender or securing more cash.
Final walkthrough problems
The final walkthrough is often seen as a formality, but sometimes problems can arise. There have been times where furniture or applicants that were agreed-upon to stay with the house are moved out, or maybe there was accidental damage to the floors or doors as the sellers moved out. These can cause delays in the closing process.
Life is full of surprises. An unexpected medical or car emergency can quickly drain thousands of dollars out of your bank account. Maybe you or your spouse’s employment was upended by a pandemic. When life throws you a curveball, speak to your agent about your options. You may be fortunate enough to keep your offer on the table. Conversely, you may have to back out of your offer and assess your new financial situation. Doing so may cause you to lose your earnest money deposit, so it is not a decision to be taken lightly. However, it may save you money in the long run to secure a loan instead of an all-cash offer. Even if you get a loan, having more cash on-hand for a larger down payment or earnest money can help your new offer stand out.