The Pros and Cons of Making an All-Cash Offer on A House

Real estate purchases made entirely with cash are rumored to create big benefits for homebuyers. But making an all-cash offer on a house isn’t always a no-brainer. There are actually some pretty compelling reasons why you might not want to offer all cash on a house.

With the help of Brad Graves, a top real estate agent in San Antonio, Texas, and some recent national home purchase data, we’ll examine the pros and cons of all-cash offers. We’ll also uncover some ways you can take advantage of all the pros and none of the cons of an all-cash offer. If you’re a first-time homebuyer — whether you can make an all-cash offer or not — here is what you need to know.

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What is an all-cash offer?

According to 2024 data from the National Association of Realtors, 26% of all buyers purchased their home with cash. As the name implies, an all-cash offer means that you, personally, have all the money needed to purchase the house. You won’t literally be paying in hundred-dollar bills, but with an all-cash offer, you must have the funds to purchase the home available in a liquid account, meaning an account that allows immediate withdrawals and transfers. For most people, this means a checking, savings, or money market account.

To be clear, an all-cash offer means you won’t be getting a mortgage loan for any portion of the sale. This is important: if your real estate agent puts in an all-cash offer on your behalf, they will not include a financing contingency. The seller makes decisions based on the terms of your offer, including contingencies. So, in many cases, making an all-cash offer means you won’t even attempt to obtain financing at all. (No changing your mind after the offer is accepted!)

Graves points out that other contingencies are also optional with an all-cash offer. These could include:

  • The appraisal contingency: Lenders require an appraisal, but if you are paying cash and you’re confident that the price is fair, you don’t need one. This can save you between $300 and $450.
  • The inspection contingency: As a cash buyer, an inspection contingency is optional. (However, inspections are still highly encouraged and only cost around $343 on average.)
  • The sales contingency: A sales contingency means your current house must sell before you close on this new house. This is the opposite of liquidity, so usually all-cash offers do not contain a sales contingency. Including a sales contingency is not impossible, but it negates the attractiveness of an all-cash offer to a seller.

Bottom line: An all-cash offer means you have the full amount available in a liquid account, you will not be getting a mortgage loan, and you can waive certain contingencies.

What are the benefits of making an all-cash offer?

Pro #1: Limited contingencies

As mentioned above, one of the benefits of making an all-cash offer is the ability to pick and choose your contingencies. Not only will this save you some money, but in a competitive market, an offer without contingencies can be highly desirable to a seller.

Pro #2: Less hassle and fees

All-cash offers are also nice for homebuyers because you don’t have the hassle of dealing with lender underwriting. That means no need to gather tax returns, income statements, proof of employment, asset lists, credit scores, blood types (just kidding). You’ll also save on closing costs associated with getting a mortgage loan.

Pro #3: Quick, streamlined closing

With an all-cash offer, you have more control over the closing timeline as well as the title agency. That means you can typically close faster because you’re not waiting for any financing to come through. This can be an important point for sellers who are in a hurry to move.

Pro #4: Possible savings

We’ve already established that sellers may be attracted to an all-cash offer because of the limited contingencies and quicker timeline. As a result, you might be able to make a lower offer — and still have it accepted by the seller — even in a multi-offer scenario.

Graves says that an all-cash offer provides leverage that your real estate agent can use to drive the price down. This adds up to possible savings and an increase in equity right from the start.

Bottom line: An all-cash offer streamlines the homebuying process and can sometimes persuade sellers to accept a lower price.

What are the drawbacks of making an all-cash offer?

Con #1: Loss of liquidity

Liquidity should be your top consideration when making an all-cash offer.

Real estate is a non-liquid asset, meaning it’s difficult to get cash out when you need it. Ask yourself: “If I tie up this much money, will I have enough left over for emergencies?” Many financial experts recommend saving at least enough to cover three to six months’ worth of expenses. For some, an all-cash offer will cut into that savings.

Con #2: Loss of diversification

If you put a large portion of your savings into your home, that means you lose out on the potential gains that could be realized by investing elsewhere.

Graves mentions that the national average appreciation for real estate usually runs around 2% to 3%. “Your money might earn more elsewhere,” he says.

Consult a financial advisor if you’re unsure about the diversification of your investments.

Con #3: Tax implications

Mortgage loan interest is deductible on your federal income taxes, so without a mortgage loan, you lose that deduction. However, this loss really only applies to those who itemize their deductions (rather than taking the standard deduction). If necessary, ask an accountant for guidance in your personal situation.

Con #4: Less cash for homeownership

Owning a home requires more money than just the purchase price. You still need to budget for closing costs, potential renovations, and general upkeep. Before jumping into an all-cash offer, ask yourself if you have enough to cover taxes, insurance, HOA fees, and any updates or repairs that need to be made.

Bottom line: Think twice about tying up all your money in an all-cash offer — your financial liquidity and taxable income are at stake.

Will a cash offer always win?

In a hot real estate market, buyers are constantly looking for ways to stand out. An all-cash offer can be a game-changer, giving you a competitive edge over other bidders — especially when multiple offers are on the table. However, a cash offer does not necessarily win by default. While cash offers are attractive, sellers may still choose a higher-priced financed offer if the difference is significant.

Sellers love cash offers for the faster closing, fewer risks, and the speed and certainty of a transaction. Cash offers are especially powerful in high-demand, low-inventory markets, where sellers receive multiple bids.

In these situations:

  • Homes often sell above asking price due to bidding wars. A cash offer can stand out even if it’s not the highest bid.
  • Sellers may waive contingencies for cash buyers to streamline the process.
  • Luxury and investment properties often attract cash buyers who want to close quickly and avoid financing complexities.

With that said, if you’re in a competitive market, consider offering slightly above asking price or waiving contingencies to make your cash bid even more compelling.

Is there any way to make an all-cash offer and avoid many of the drawbacks?

Products like HomeLight Buy Before You Sell will let you make your strongest (cash) offer on a home from the seller’s perspective without a home sale contingency. That way, you won’t have to move twice and pay for two mortgages at a given time.

Here’s how HomeLight Buy Before You Sell works:

  • Talk to a loan officer to get qualified and approved. We’ll evaluate your property for the program and let you know how much of your equity you can unlock for the purchase of your new home.
  • House hunting and close on new home. Make a strong offer on your new home without a home sale contingency — and avoid moving twice.
  • Sell your former home with peace of mind. Your agent lists your vacant home on the market to attract the strongest offer possible.

Bottom line: For qualified buyers, HomeLight Buy Before You Sell could give you the pros of an all-cash offer by unlocking the equity from your current home and using it to fund your purchase.

Is an all-cash offer right for you?

Making an all-cash offer is the best choice for some homebuyers and an unwise move for others. Talk with your real estate agent and consult with financial professionals in order to maximize both your buying potential now and your long term financial security in the future.

When should you NOT make an all-cash offer?

Paying all cash for a home can be a smart move in many cases, but it’s not always the best financial decision. Before liquidating assets or tying up a significant portion of your savings in real estate, consider these situations where keeping a mortgage might make more sense:

  • When mortgage rates are low. If interest rates are favorable, financing your home purchase could be a strategic financial move. Instead of using all your cash, you could take advantage of low rates and invest your money elsewhere for potentially higher returns. For example, if your mortgage rate is 5% but your investments yield 7%, it might be better to finance the home and let your money grow.
  • When you want to keep liquidity for other investments. Real estate is an illiquid asset — once you’ve put all your cash into a home, it’s not as easy to access that money for emergencies, investment opportunities, or other financial goals. If keeping cash on hand for stocks, business ventures, or unexpected expenses is important to you, taking out a mortgage might be a better route.
  • When you qualify for first-time buyer or VA loan benefits. If you’re a first-time buyer or a veteran, you might qualify for special loan programs with benefits like low down payments, reduced closing costs, or no private mortgage insurance (PMI). In this case, taking out a loan instead of paying all cash could free up money for home improvements or other priorities.
  • When you can use leverage to buy a more valuable property. By financing your home instead of paying cash, you might be able to buy in a better location or purchase a property with greater appreciation potential. If stretching your budget slightly by using a mortgage means getting a home in a more desirable area with better long-term value, it could be a smart financial move.

Bottom line: While making an all-cash offer can speed up the buying process and give you negotiating power, it’s not always the best choice. Consider your liquidity, investment strategy, and financial goals before deciding whether to buy with cash or take advantage of financing options.

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