When it comes to selling your home, you have several options. Two of the most common methods are accepting a cash offer or listing your home on the MLS (Multiple Listing Service). Both approaches come with their own sets of advantages and challenges. Deciding which path is right for you largely depends on your personal circumstances, timeline, and goals. In this blog, we’ll break down what a cash offer on a home means, how it compares to listing on the MLS, and why you might choose one over the other.
What is a Cash Offer on a Home?
A cash offer is a proposal from a buyer who has the funds available to purchase your home without needing a mortgage or other financing. Essentially, it means the buyer has the money ready to pay for your home in full, without the delays or complications that often come with securing a loan. Cash offers are often used by investors, real estate companies, or individuals looking for a quick and straightforward home purchase.
What Does Listing a Home on the MLS Involve?
The MLS is a service that allows real estate agents to list properties for sale and make them visible to a broad audience of potential buyers. When you list your home on the MLS, your property is marketed to a wide range of prospective buyers, including those using conventional financing, such as mortgages, and cash buyers as well. Selling through the MLS typically involves preparing the home for showings, holding open houses, negotiating offers, and going through an escrow process with inspections, appraisals, and other steps that ensure the sale is legally and financially sound.
Comparing Cash Offers and MLS Listings
Now that we have a basic understanding of both options, let’s compare them across several key factors:
1. Speed of Sale
One of the biggest advantages of accepting a cash offer is the speed of the transaction. Cash sales are typically much faster than sales that require financing because they don’t rely on mortgage approval or appraisals. In many cases, a cash sale can be completed in as little as two weeks, sometimes even sooner, depending on the buyer’s situation and the seller’s preferences.
In contrast, listing your home on the MLS can take longer, especially if you need to prepare your home for the sale to appeal to the optimal number of buyers. After listing, you’ll need to make the home available for showings, wait for offers, negotiate, and then go through the escrow process. Depending on the market and your home’s condition, this process can take anywhere from a few weeks to several months.
2. Risk
Cash offers are generally considered less risky because they eliminate many of the uncertainties associated with traditional home sales. Since the buyer isn’t relying on financing, there’s no risk of the deal falling through due to a loan denial, appraisal issues, or other financing-related complications.
On the other hand, when listing on the MLS, there is more risk involved. Even if you receive multiple offers, one could fall apart if the buyer fails to secure financing or if the home appraisal comes in lower than the sale price. There’s also the risk that your home might not sell at all if it doesn’t attract the right buyer within a reasonable timeframe.
3. Paperwork
The paperwork involved in a cash sale is usually more straightforward. Since there is no lender or bank involved, the process is often streamlined, and you’ll only need to deal with the buyer, title company, and possibly an attorney. This means fewer forms, less back-and-forth, and fewer opportunities for complications.
Listing on the MLS, however, involves more paperwork and documentation. You’ll need to sign a listing agreement with a real estate agent, fill out disclosure forms, respond to offers, and deal with any contingencies that might arise during the negotiation process. There may also be additional paperwork related to inspections and appraisals.
4. Condition of the Home
If your home requires significant repairs or upgrades, a cash offer might be the best option for you. Cash buyers, especially real estate investors, often purchase properties as-is, meaning you don’t have to spend time or money on repairs. This can be a huge advantage if you don’t have the resources to fix up your home or if you need to sell quickly.
When listing on the MLS, you may need to make repairs or improvements to attract serious buyers. Even if you don’t make major changes, buyers may request repairs or negotiate a lower price based on the condition of the home. This means you may need to invest time and money into getting your home ready for sale, which can be a significant factor if you’re looking to sell quickly or with minimal hassle.
5. Price
One of the key differences between cash offers and MLS listings is the potential price you can get for your home. Cash offers are almost always lower than what you could receive through a traditional listing. This is because cash buyers are typically investors looking for a deal, and they factor in the costs of repairs, potential resale, and the speed of the sale. Since the transaction is quick and doesn’t require as much risk, they may offer a lower price as compensation.
However, this doesn’t mean that cash offers are always significantly lower. In some cases, a well-priced property in a hot market may attract competitive cash offers, narrowing the price gap. Additionally, some cash buyers may offer near-market value if the property is in excellent condition and is an attractive investment.
On the other hand, when listing on the MLS and marketing the property to a larger buyer pool, you almost always receive a higher sale price. Roughly 80% of real estate transactions are financed using mortgages. If you eliminate 80% of your buyer pool, it’s very hard to generate the necessary interest to receive a competitive price on your home.
6. Why Cash Offers Are Typically Lower
The reason cash offers are usually lower than MLS prices boils down to the buyer’s need to factor in their profit margins. Real estate investors, for example, often purchase homes at below-market prices with the goal of reselling or renting them for a profit. They take on the risk of repairs, potential vacancies, and market fluctuations, so they need to buy at a price that allows them to make money.
Additionally, the vast majority of potential home buyers rely on mortgages to finance their purchases. Real estate is the ultimate supply and demand market. The more demand (potential buyers) you have for your home, the more money you get.
How Grant Team Properties at RE/MAX Elite Can Help
At Grant Team Properties at RE/MAX Elite, we understand that every homeowner’s situation is unique. Whether you’re considering a cash offer or want to list your home on the MLS, our team can guide you through the process, helping you evaluate the best option for your circumstances.
We can help you assess the potential benefits and drawbacks of both options, ensuring you make an informed decision that aligns with your financial goals, timeline, and desired outcome. If you need a fast sale and don’t want to deal with repairs, a cash offer might be the best choice. If you’re willing to wait for the right buyer and potentially receive a higher price, listing on the MLS could be the way to go. We are a full-service team who can help you prepare the home for listing, recommend contractors for potential repairs, and even advance you the money for improvements to increase your net proceeds.
No matter which option you choose, Grant Team Properties at RE/MAX Elite is here to provide you with expert advice and support every step of the way. Reach out to us today at 425.483.4200 to discuss your selling options and find the right path for your home.