How Common Are Cash Offers For Your House?

All-cash offers have become increasingly popular over the last few years, especially amongst real estate investors. But just how common are cash offers and selling homes for cash compared to traditional financed offers? In this post, we’ll look at the latest data on cash offer trends.

Cash Sales on the Rise

Cash offers have become increasingly common for home sales in Canada in recent years:

According to a 2021 survey by Zoocasa, 25% of home sellers in Canada reported receiving an offer with a cash component in 2020. This was up from just 15% in 2019.
Data from Bank of Montreal shows that the share of Canadian home sales transacted in cash grew from 18% in 2016 to over 20% in 2020.
Real estate boards across Canada have reported spikes in cash offers, especially in highly competitive markets like Toronto and Vancouver. For example, the Toronto Regional Real Estate Board saw cash sales rise over 60% year-over-year in the first quarter of 2021.
An analysis by National Bank found that in Toronto, the share of home sales made in cash increased from 14% in 2016 to over 20% in 2020. In Vancouver, cash sales grew from 12% in 2016 to 16% in 2020.
Overall, industry experts estimate that 15-25% of Canadian home sales involve a cash offer currently, with cash being much more prevalent among higher priced luxury home sales.

So while it varies by region, cash offers make up a sizable and growing percentage of Canadian real estate transactions, giving sellers an alternative to traditional financed offers.

Cash Offers More Competitive

Cash offers tend to be more competitive compared to traditional financed offers in Canada’s real estate market:

Cash offers allow buyers to close quickly, usually within days or weeks, compared to 30-60+ days for financed offers. This accelerated timeline is attractive to sellers.
With a cash offer, there is no risk of a financing falling through, providing more certainty of sale for sellers.
Cash buyers typically waive conditions like home inspections and appraisals, making their offers cleaner. This reduces chances of renegotiation.
Cash offers empower buyers to be more aggressive with purchase prices and terms since lender approval is not a factor.
In multiple offer scenarios, sellers often prioritize cash bids over financed ones due to their speed and security.
Recent data showed over 50% of Toronto home sales with multiple bids sold to the buyer with the highest proportion of cash.
However, cash buyers may negotiate harder on price or closing costs to account for their quick closing capability.

Overall, the certainty, speed and flexibility of cash offers give them a competitive edge in Canada’s real estate market. But financed offers can still win out if they meet asking price and terms.

In the U.S., the same Zillow data reveals that cash offers tend to be more competitive than financed ones. On average, cash buyers offered $5,000 over the list price compared to $2,000 over for financed offers.

In expensive coastal markets like Los Angeles and New York, cash home buyers offered $50,000 and $25,000 over asking, demonstrating their purchasing power. You can expect this trend to occur in Canada too.

Investors Lead Cash Offer Surge

Real estate investors and iBuyers snapping up properties have fueled much of the cash buying boom. Their appetite for cash deals allows them to close quickly and beat out other buyers.

iBuyers still make up a relatively small percentage of the overall Canadian real estate market:

According to data from Zoocasa, iBuyer sales accounted for about 0.15% of transactions on the Multiple Listing Service in 2020.
As of mid-2021, Zoocasa estimated that iBuyers purchased around 1,000 homes in Canada – less than 1% of the approximately 450,000 home sales per year nationwide.
Properly, one of the leading iBuyers in Canada, says it has made “hundreds” of cash offers on Canadian homes to date.
RedfinNow, another major iBuyer, noted that its Canadian iBuying operations are still “nascent” as of 2022.
Overall industry sales numbers are not readily available, but general estimates put iBuyers at 0.5% or less of the total Canadian real estate market currently.
For context, in the US, Zillow Offers alone bought over 5,000 homes per month in 2021 – a much greater market penetration.

So while growing quickly off a small base, iBuying remains a tiny fraction of real estate transactions in Canada. The market is still earlier stage compared to the more mature US iBuying space. But industry analysts expect iBuyer market share will continue rising steadily in Canada in coming years.

In the United States, iBuyers like Zillow, Opendoor and Offerpad also purchase thousands of homes with cash to quickly flip. These “instant buyer” companies now comprise over 1% of U.S. home sales.

How Common Are Cash Offers?

Cash offers are now common in many real estate markets, giving buyers willing to pay upfront an advantage. Sellers can expect all-cash competition on almost a third of listings in 2023. Tapping into investor demand via a cash sale is one way to sell faster. But it’s wise to still compare offers, as financing can drive a higher sale price.

What prompts these cash offers to take center stage in real estate transactions? Let’s explore the scenarios in which they tend to be more common:

Investor Interest:

Investors and investment companies are often keen on leveraging cash offers to swiftly acquire properties, especially those with great potential for flipping or long-term gains.

Proceeds from Previous Sale:

Buyers who have recently sold their previous homes and now have ample sale proceeds at their disposal find cash offers an attractive option for their next purchase.

iBuyer Involvement:

Sellers who engage with iBuyers, companies specializing in direct home purchases, frequently encounter cash offers as a convenient means of facilitating quick transactions.

Yes, there are some iBuyer companies operating in Canada’s real estate market:

Zoocasa – One of the first iBuyers in Canada, Zoocasa launched its “Fast Sale” instant offer service in Toronto and Vancouver in 2018.
RedfinNow – The iBuying arm of Redfin expanded to Canada in 2020, offering quick cash offers and closings in Toronto, Calgary, Edmonton and Vancouver.
Offerpad – This large U.S. iBuyer entered the Canadian market in 2021, starting operations in Greater Toronto.
Properly – A Canadian tech-based real estate company, Properly started its “Properly Cash Offers” iBuying service in 2021. It’s available in the Greater Toronto Area.
WeBuyHouses – A Canadian home buying company, WeBuyHouses provides cash offers through its Express Home Offer service across parts of Southern Ontario.
Korell – This Ontario-based company presents itself as a “modern real estate solution” and has an Instant Offer iBuying option.

While still early, iBuying adoption seems to be increasing in Canada, led by both homegrown companies and U.S. expansions. But it remains less pervasive compared to the U.S. market.

Standing Out in Competitive Markets:

In highly competitive markets, cash offers can help buyers distinguish themselves from the crowd, potentially securing their desired property amidst stiff competition.

Fix-and-Flip Opportunities:

Properties in need of significant repairs or renovations become prime candidates for cash offers, particularly when buyers perceive them as lucrative fix-and-flip prospects.

Cash offer considerations if you’re selling a house

It’s important to note that the scenarios listed above are not exhaustive; cash offers can manifest in various transaction contexts. Whether you’re considering buying or selling a home in the near future, understanding the dynamics of cash offers and their prevalence is a crucial component of making informed decisions.

Cash offers introduce a sense of swiftness to the real estate process. By sidestepping mortgage applications, documentation, and underwriting, buyers can expedite their transactions significantly. Redfin notes that all-cash offers may be closed in as little as two weeks, a stark contrast to the average 43-day timeline for traditional mortgage loans as of September 2019.

Fewer contingencies characterize cash sales, reducing the complexities often associated with financing. Appraisals, typically demanded by lenders, become less prevalent in cash offers, simplifying the process further. Closing becomes more straightforward, requiring minimal paperwork and often resulting in lower overall costs due to the absence of lender fees.

Cash Offer For Your House

However, it’s worth noting that cash home buyers must demonstrate their financial capability to sellers before proceeding. Unlike buyers with mortgage loans who come pre-approved, cash buyers must provide a proof of funds letter from their bank, verifying their readiness to complete the transaction.

In conclusion, cash offers are a common and advantageous facet of the real estate landscape. While they offer speed, simplicity, and various perks for both buyers and sellers, it’s crucial to weigh their pros and cons against your individual circumstances and goals. Real estate transactions are multifaceted, and each approach comes with its own set of considerations. Consulting with real estate professionals and advisors can provide valuable insights, ensuring your chosen path aligns with your objectives.

How Can I Sell My House for Cash with a Local Realtor?

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What Realtors Have Cash Buyers?

If you want to explore selling your house for cash turn to Steve Augustine and Your Home Sold Guaranteed Realty Elite – The Augustine Team. With 20+ years of real estate experience, our realtors are one of the top-performing real estate teams in the Hamilton, Burlington, Grimsby and surrounding areas.

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Whether you’re after a cash or financed sale, we can help you explore your options and make sure you get the best possible deal on your home. With our industry knowledge, database of pre-qualified buyers, and unique guarantees like our Guaranteed Sale Program, we’re easily the best choice for a smooth home-selling experience.

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