Making an All-Cash Offer in DC - What You Need to Know
By Alex Mikoulianitch on February 18, 2024
The most attractive initial offer in any competitive real estate market usually takes home the prize.
Making an "all-cash" offer on a home in Washington, DC can make your offer stand out immediately. But this usually entails a sizable amount of cash and an impactful financial commitment. So before you move forward, you want to be 120% sure you are ready to purchase.
All-cash offers have risks and rewards and don’t always involve a suitcase full of money at closing. Below, the team from Prevu Real Estate breaks down everything you need to know before making an all-cash offer in Washington, D.C.
Making an All-Cash offer in the District of Columbia
- What is an all-cash offer in Washington DC?
- What do you need to make an all-cash offer?
- Pros of all-cash offers
- Cons of all-cash offers
- When to make an all-cash offer
- How to save money when buying all-cash
What is an all-cash offer in Washington DC?
A buyer who foregoes mortgage financing and purchases a home with all cash chooses to make an all-cash offer.
Some all-cash home buyers have the total amount in liquid assets ready to go, while others may combine their cash savings with a personal loan or family gift to meet the necessary home price.
Sellers will expect a sizable down payment from an all-cash buyer as it will serve as proof the buyer is serious about the purchase. Just as pre-approval letters show that financed buyers can buy a home, large down payments can serve as all-cash buyers' votes of confidence.
What do you need to make an all-cash offer?
You will need proof of funds (POF) to demonstrate to a listing agent that you have the cash necessary to purchase the home.
The POF can typically be a bank statement outlining your account holdings and demonstrating you have the total amount ready to pay for the desired home.
Once the listing agent and seller are satisfied with the proof of funds, you can move forward with the purchase by making an earnest money deposit.
Remember that you may forfeit this deposit if you back out of the deal, as most all-cash offers typically waive financing contingencies. You may negotiate an inspection contingency to ensure the home has no significant flaws during due diligence, but it can potentially make your offer less attractive.
Pros of all-cash offers
- Minimize your closing costs. Purchasing a home all-cash typically allows you to bypass traditional closing costs in DC, such as loan origination fees and appraisal fees. This can help you save money on one of the most expensive home purchase costs.
- Your offer stands out. Desirable DC homes usually attract multiple offers. Making an all-cash offer can immediately help you stand out from the competition, as it offers the seller faster access to funds and a quicker closing process.
- Move quickly. Traditional home purchases can last anywhere from three weeks to a few months to close. All-cash offers can sometimes close within a few days.
Cons of all-cash offers
- You tie up your capital. Buying a home all-cash means putting a large number of liquid assets into an illiquid investment. This can prevent you from investing in other assets and having cash on hand in case of an emergency.
- You’re committing to the purchase. You’ll likely need to waive certain contingencies, such as appraisal contingencies and inspection contingencies, to make a firm all-cash offer. This can put you at risk of losing your earnest money deposit if you choose to back out.
When to make an all-cash offer in DC
As powerful as an all-cash offer can be, buyers may want to use this option only if they’re confident in their financial stability.
All-cash offers help buyers beat the competition, making them an excellent option if you are certain that Federal-style single-family home you found in Capitol Hill is "the one."
But it’s always wise to weigh the pros and cons of paying cash for a home. For example, you’ll likely lose a lot of liquidity, which can prevent you from diversifying your portfolio and profiting from other investments.
All-cash offers bypass financing and monthly mortgage payments, but specific scenarios might make the latter a sounder option, depending on the market and mortgage rates.
Working with a buyer’s agent can be an invaluable way to help you decide what works best for you.
How to save when making an all-cash offer in DC
Working with a real estate agent that offers commission rebates can make your all-cash home purchase more affordable.
Commission rebates, also known as commission refunds, are a portion of your broker’s commission fee refunded to you after closing on a home. Savvy DC home buyers utilize these modern real estate tools to find affordability in an otherwise competitive and expensive market.
Prevu currently offers the largest commission rebate in Washington, DC, allowing buyers to receive a portion of their agent’s commission as a rebate.
For instance, a buyer who partners with a Prevu agent and purchases a $1,600,000 condo in Logan Circle can potentially receive up to $16,000 back after closing.
The rebate can alleviate the impact of an all-cash home purchase, providing extra cash to invest in renovations, replenishing savings, and helping offset unforeseen expenses.
Interested in buying a home in Washington DC? Browse listings and see how much you can save with Prevu’s commission rebate.
