Cash offers can be a bad joke

We went into contract to sell our home with five offers on the table. The buyers who prevailed purported to have an all-cash offer. Now our listing agent informs us that the buyers have not deposited their earnest money deposit into escrow. He now claims “not all-cash offers are all they’re cracked up to be.” This was a stunning reversal because our agent had praised the cash offer. Now we have lost all faith in the buyers and both agents. What can we expect moving forward with this “all-cash” offer?

Expect the unexpected. The all-cash buyer was instrumental in making other competing homebuyers disappear. As a result, you might await a list of repairs to appear in your so-called “as-is” offer. Nowadays, all-cash buyers might even turn around and fill out loan applications. So, don’t be surprised by a phone call from a bank appraiser requesting an appointment. Deadlines are not suggestions, so you might also anticipate a demand to lower the sales price before the deposit materializes, or the “all-cash” buyer cancels. Yes indeed, some of these well-heeled buyers are also known to cancel at the end of a sale. Then sellers are left with unfairly stigmatized listings while fighting over the deposit.

It was always counterintuitive to me that a buyer purchasing the property out-of-pocket would be less of a risk than a homebuyer using financing. After all, a homebuyer with one-fifth cash investment in the sale should feel comfort that a bank is covering the other four-fifths. Savvy sellers have agreed by telling me “the bank’s money is just as good as theirs.” Meaning, the cash buyer had nothing over the pre-approved homebuyer. However, that skeptical view of all-cash offers was, as it is now — rare. Unfortunately, dotcom funny-money bolstered the term “all-cash offer” into an even stronger air of certainty. On the other hand, fast-forward to The Great Recovery where all-cash offers have become a joke in some circles.

All-cash offers that used to beat out other buyers in a multipleoffer situation can now be a negotiation gambit. An unethical tool used to tie down a seller and property while the all-cash buyer continues to shop or make offers on other homes. Ratifying an offer on a Friday gives a contract default of three calendar days before the buyer’s deposit is due in escrow. To avoid a “lost weekend,” I ratify offers on Tuesday or Wednesday and have all deposits in escrow within one-day. Many of these all-cash buyers purposely won’t put a deposit in escrow which is meant to set the stage for renegotiations. They are keenly aware that a seller does not want a sale falling apart and stigmatizing their property. In this situation, the buyer is the one driving the bus; you must decide to get back in the driver’s seat or fasten your seat belt for a bumpy ride.

Pat Kapowich is a full-service Realtor representing first-time buyers to re-sizing sellers. Take a class with Pat at De Anza College or contact him at 408245-7700 and Pat@SiliconValleyBroker.com.