Newsletter

Ask Val: Cash vs Mortgage

This regularly-scheduled sponsored Q&A column is written by Val Sotillo, Northern Virginia-based Realtor and Falls Church resident. Please submit your questions to her via email for response in future columns. Enjoy!

Question: I just lost a competitive offer to an all-cash buyer. How common are cash buyers in Fairfax County? How much of a disadvantage am I at?

Answer: I have personally experienced this last weekend when I helped buyers write a great offer that lost to an all-cash offer. When I ran the numbers I expected to find a significant increase in the number of cash deals over the last 12-18 months, but I learned that the percentage of homes purchased by all-cash buyers has actually decreased a few percent in the last couple of years. I believe this drop is partly due to the current record low interest rates.

The rate of all-cash purchases seems to be spread pretty evenly across all price-points and housing types. In the past five years, condo sales have steadily been only 30% of all-cash deals, and 80% of those were sub-$400k condos.

The chart below shows the number of homes sold in Fairfax County that were bought by all-cash buyers since 2015.

Cash vs Financing a Mortgage — What’s the Difference?

The idea of getting a cash offer sounds exciting, but what exactly does it mean? After all, a dollar from a lender is worth the same as a dollar from a savings account.

  • Contingencies: Cash buyers don’t need the contractual protection of a financing or appraisal contingency because they don’t need a lender to approve/review anything. This is appealing for sellers because it decreases the possibility of something going wrong that disrupts the sale.
  • Speed: Cash deals can close faster, often in one week or less, than financed deals which usually take at least 3-4 weeks due to the time it takes to process the loan.
  • Security: Cash deals are considered more secure because the purchase funds are already available.
  • Cost: Cash deals have lower buyer closing costs because there are no lender fees or lender’s title insurance. Lenders also require a substantial about (usually 1-1.5% of purchase price) of money be pre-paid into an escrow account for future property tax payments and homeowner’s insurance.

Given how competitive the current housing market is, many buyers using a mortgage take steps to make their offers as cash-like as possible by removing the appraisal and financing contingencies and/or working with lenders who can close quickly. For buyers that have taken these steps, there’s very little difference to sellers between their offer and a cash offer.

If you are a seller considering a cash offer, make sure you verify the existence of the cash funds the same way you would verify a buyer’s mortgage qualification with a pre-approval letter. The most common method of verification is to request bank statements, but a letter from the buyer’s bank should also suffice.

If you’d like to discuss buying or selling strategies, don’t hesitate to reach out to me at [email protected].

Val Sotillo is a licensed Realtor in Virginia, Washington D.C., and Maryland with Real Living At Home, 4040 N. Fairfax Drive, Suite #10C Arlington, VA 22203, 703-390-9460.

Recent Stories

The FCPD reported an overall drop in crime last year compared to 2020, though there was an uptick in homicides. It’s unclear when staffing will resume to normal operations, according…

Looking up at Tysons Tower outside Tysons Corner Center (staff photo by Angela Woolsey) Route 7 Traffic Shift Starts Today — “During the daytime hours on Aug. 11 and the…

An ongoing thunderstorm has taken out power for hundreds of Fairfax County residents, as the threat of flash flooding looms. The National Weather Service has issued a Flash Flood Warning…

Perhaps sensing a growing weariness with the heat of summer, Wolf Trap National Park for the Performing Arts has released a preview of its upcoming fall season. Announcing its first…

×

Subscribe to our mailing list