“Cash is king”—in a hot Boston Back Bay condo for sale market, this adage is definitely true. At the height of the market last summer, we saw all-cash offers become wildly popular. The market has begun to moderate slightly, but cash offers are still hot.
If you’re thinking of selling your home, you might be wondering about all-cash offers. What are they, exactly? What does receiving an all-cash offer mean for you as a seller? Finally, should you be prepared to make an all-cash offer when you look for your next home?
We’ll run through the answers to these questions so you feel prepared for your next real estate transaction.
An all-cash offer is when a Boston Back Bay condo buyer is able to pay for a home without taking out a mortgage. Logistically, this usually means the Boston condo for sale buyer is paying with a certified check or sometimes a wire transfer. They might truly have that much cash, or they might be borrowing it—just not borrowing it against the property (as with a traditional mortgage).
Effectively, cash offers waive what’s known as a financing contingency. When a home is purchased with traditional financing, the financing contingency usually states that if the financing doesn’t come through by a certain date, the buyer can walk away—WITH the money they put down.
In a cash Back Bay condo sale, the buyer waives this ability to walk away with their earnest money if something happens and they can’t finish the deal. The seller would get to keep any down payment the buyer had made. Therefore, the size of the down payment is important in an all-cash offer; the bigger the down payment, the more serious the buyer appears and the more likely the seller is to accept their offer.
Selling your Boston condo for sale for cash is simpler and faster than selling with a financing contingency. You know the buyer is serious as long as they put down a substantial down payment, and there’s much less risk of the sale falling through. You also remove the risk of your property appraising lower than what the buyers offered—when this happens, a buyer has to cover the difference between the appraisal amount (which their mortgage will cover) and their original offer. If they don’t have that extra cash, they’ll have to walk away. Lastly, an all-cash deal can close much faster than one involving financing.
But he notes that cash is still king when it comes to pricey properties in downtown Boston and in Cambridge: “Basically wealthy buyers who have been stashing away cash for years and are now making their move.”
He adds: “Fewer cash buyers certainly would be good news for average buyer who has to rely on getting a mortgage to buy a house.”
It’s incredible how much of the housing market recovery has been fueled by all-cash deals, driven partly by all-cash foreclosure auctions and wealthy investors.
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Updated: Boston Real Estate Blog 2022