When is a cash offer not cash?

Cash offers typically refer to an offer where the buyer has the funds available – whether in cash from a previous property sale, savings, investments or other liquid assets – to complete their purchase without needing a loan. Cash offers can be very appealing to sellers, as they remove the uncertainty associated with financing. They know they won’t have to wait on bank approvals, which can be lengthy, or worry about loans falling through. When competition is high and properties are selling quickly, as they are now, cash offers can give buyers a significant edge. REIWA members have noted a rise in cash offers, however not all of these involve the buyer having cash in the bank. Buyers can make a cash offer even if they need to borrow funds. This is done by removing the subject to finance clause in the contract. However, this strategy comes with risks. If you waive the finance clause but are unable to secure your loan, you could lose your deposit and miss out on the property altogether. In some cases, if the seller is forced to relist the property and it sells for less than what you offered, they can take legal action to recover the difference. If you are thinking of making a cash offer but will need to get finance, it is important to get a good idea of what you can borrow before you start looking for a home. This will allow you to be confident in the offer you put forward. Make sure you speak to a mortgage broker about preparing your finances to give you the best chance of securing a loan. This can include reducing debt and potential debt, such as credit cards, and reviewing and adjusting your expenses. A broker will also be able to determine which lender you will have the best chance of getting a loan with. In addition, it would be wise to obtain a pre-approval from the lender for the funds needed to purchase the property. This way, final approval will largely be a formality, and you’ll know exactly how much you can borrow and what your potential offer should be. While cash offers can give buyers an edge, there are other ways to make your offer potentially more appealing to a seller. These can include providing a bigger deposit, offering a longer settlement, allowing the seller to rent the property while they look for a new home or placing fewer conditions in the contract. If you are considering buying a home, it is important you be upfront with your agent about how you can strengthen your offer, and what terms and conditions may be more attractive to the seller of the property.