The price is not always the net.
Selling your home to a cash buyer can offer real advantages. You may be able to avoid repairs, reduce showings, choose a convenient closing date and eliminate the uncertainty of a buyer’s mortgage approval.
But “cash offer” does not necessarily mean “simple offer.”
Some cash purchase agreements are more than 20 pages long and include separate addenda, service charges, inspection provisions, cancellation rights and closing-cost allocations. The purchase price displayed on the first page may not be the amount the homeowner receives at closing.
Before accepting any cash offer, homeowners should look beyond the headline number and understand the entire agreement.
1. Calculate the actual net offer
The first question should not be:
What is the purchase price?
It should be:
How much will I actually receive after every charge, credit and closing expense?
For example, a recent cash offer packet listed a purchase price of $508,000, but a separate addendum required the seller to credit the buyer $25,328.09 for a “Simple Sale charge.” That charge alone represented approximately 5% of the purchase price.
The packet also contained a separate due-diligence agreement proposing an additional $4,827.80 seller credit. That document would not become binding unless signed by both parties, but its inclusion demonstrated how significantly the original offer could potentially change after the buyer evaluated the property.
A homeowner should request a written estimate showing:
- The purchase price
- Buyer or service charges
- Anticipated repair deductions
- Seller-paid title or closing expenses
- Real estate compensation
- Taxes, liens and HOA charges
- The estimated proceeds to the seller
A high offer with substantial deductions may produce a lower net than a smaller, cleaner offer.
2. Determine how much money the buyer is putting at risk
Deposits reveal how financially committed a buyer is to completing the purchase.
In the example above, the offer included:
- A $0 due diligence fee
- A $1,250 earnest money deposit
- A $508,000 purchase price
In North Carolina, the due diligence fee is generally paid directly to the seller in exchange for the buyer’s right to terminate during the due diligence period. When the due diligence fee is zero, the buyer may have very little immediate financial exposure if it decides not to proceed.
The earnest money deposit is also important, but homeowners need to understand when it can be returned to the buyer. A deposit is not meaningful protection if the agreement gives the buyer broad rights to cancel and recover it.
Ask:
- How much money does the buyer deposit?
- When is it due?
- Who holds it?
- Under what circumstances is it refunded?
- What does the seller receive if the buyer cancels?
3. Do not assume “as-is” means the price will not change
Many cash buyers advertise that they purchase homes as-is. That does not always mean they have agreed to the original price regardless of condition.
The addendum in this particular offer allowed the buyer to conduct a diligence visit and then propose adjustments based on the condition of the property. If the parties did not agree on the adjustment, the contract could be canceled and the earnest money returned to the buyer.
That process is sometimes called a retrade: the buyer presents an attractive initial offer and later seeks a price reduction or seller credit after evaluating the home. For the broader picture on assignment and investor spreads, see [Cash Offer or Equity Grab].
Before signing, clarify:
- Is the initial price firm?
- Can the buyer reduce it after an inspection?
- Is there a limit on the requested reduction?
- Can the seller reject the adjustment and remain under contract?
- What happens to the deposit if the parties cannot agree?
A legitimate inspection period is not inherently unreasonable. The concern is whether the homeowner understands that the initial offer may not be the final offer.
4. Read every cancellation provision
The standard contract is only one part of the agreement. An addendum can expand or change the buyer’s termination rights.
In the reviewed packet, the buyer’s addendum identified several circumstances under which the buyer could cancel before closing, including issues involving:
- The diligence process
- Clear title
- Open permits
- Property condition
- Tenants or occupants
- Solar-panel obligations
- Septic systems
- Special assessments
- Changes to MLS information
The same addendum stated that its terms would control if they conflicted with the standard purchase contract.
This is why a homeowner cannot safely review only the first page.
Look for language such as:
- “Buyer’s sole discretion”
- “Buyer may terminate”
- “Without penalty”
- “Earnest money shall be returned”
- “This addendum shall control”
The more ways a buyer can terminate, the less certainty the seller actually has.
5. Identify every closing cost assigned to the seller
A cash purchase does not automatically mean the buyer pays all closing expenses.
The reviewed addendum required the seller to pay the owner’s title insurance policy and one-half of the settlement or escrow fee. Those obligations were in addition to the separate sale charge.
Homeowners should determine who pays for:
- The owner’s title insurance policy
- Settlement or escrow services
- Attorney fees
- Transfer or excise taxes
- HOA documents and transfer fees
- Surveys
- Recording fees
- Property taxes and assessments
These expenses may be legitimate, but they should be visible when the offers are compared.
6. Confirm who is actually purchasing the property
Some contracts identify the buyer as an LLC “and/or nominee.” Others permit the buyer to assign the contract to another company or investor.
In the reviewed offer, the buyer was identified as “Opendoor Property Acquisition LLC and/or nominee,” and the addendum gave the buyer assignment rights while prohibiting the seller from assigning the agreement.
Homeowners should ask:
- Is the named buyer purchasing the home directly?
- Can the contract be assigned?
- Will another company take the buyer’s place?
- Does the original buyer remain responsible?
- Has the entity that will close provided proof of funds?
Assignment is not automatically a problem. The homeowner simply deserves to know who is responsible for performing the contract.
7. Request proof of funds
Checking a box marked “cash” does not prove that funds are available.
A seller should request recent documentation showing that the buyer has sufficient funds to complete the purchase. When an assignment is permitted, the seller should also understand whether the proof belongs to the original buyer or the entity that will ultimately close.
Proof of funds should be reviewed alongside the buyer’s reputation and closing history. A large company name, website or advertising campaign is not a substitute for verifying the transaction.
8. Understand who represents whom
A cash buyer’s employee or representative may hold a real estate license, but that does not necessarily mean the person represents the homeowner.
The reviewed addendum expressly stated that the buyer and its affiliates had no brokerage relationship with the seller. It also disclosed that referral compensation of up to 2% of the purchase price could be paid to referring parties. Separate affiliated-business disclosures explained that related companies might receive a financial benefit from title, settlement, lending or brokerage referrals.
Homeowners should ask:
- Does this person represent me or the buyer?
- Is anyone receiving a referral fee?
- Are affiliated companies providing title or settlement services?
- Am I required to use those companies?
- Who can independently advise me about the contract?
The buyer’s representative is responsible for protecting the buyer’s interests. Sellers may choose to consult their own real estate agent or North Carolina real estate attorney before signing.
A simple cash-offer checklist
Before accepting a cash offer, make sure you can answer these questions:
- What is my estimated net after every deduction?
- Is the purchase price firm or subject to inspection adjustments?
- How much money does the buyer have at risk?
- How long can the buyer investigate the property?
- How many ways can the buyer cancel?
- Which closing expenses will I pay?
- Can the buyer assign the contract?
- Has the buyer provided proof of funds?
- Who represents me in the transaction?
- Are all verbal promises included in the written agreement?
Transparency should be part of the offer
At JMS Home Buyers, we believe homeowners should understand the offer before they sign it.
A cash sale may be the right solution when speed, convenience, condition or certainty matters more than exposing the property to the full retail market. It is not the right solution for every homeowner, and it should never require someone to sign an agreement they do not understand.
The best cash offer is not necessarily the one with the largest number on the first page. It is the offer that clearly explains the price, the deductions, the buyer’s obligations and the amount the homeowner should expect to receive.
Disclaimer: This article is intended for general educational purposes and is not legal, tax or financial advice. Contract terms vary. Homeowners should consult an appropriate licensed professional regarding their specific transaction.
Considering a cash offer for your home?
JMS Home Buyers can help you understand the difference between the purchase price and your expected net proceeds. We will explain the offer, the anticipated costs and the closing process so you can decide whether a direct sale or a traditional listing better fits your situation.