By Howard Morrel & Leslie Hirsch
Is cash king in residential real estate? If you are the seller of a home, should you always consider a cash deal above other offers? Is a cash offer especially good news in a trusts & estates property sale?
Well, yes and no.
It’s true that legitimate cash offers are almost always preferred for a home, but only if you have independent confirmation on three key points: 1) the offer is actually a good one, 2) the funds are truly available, and 3) the buyer is reliable. That means serious due diligence–and sometimes, it means slowing the process down.
Is Cash Best in an Estate Property Sale?
Cash offers are especially attractive for properties held by trusts and estates, where hiccups in escrow can create major hassles. The risk is generally much lower with cash and the sales process is usually much faster. There’s no risk of last-minute bank underwriting issues, no risk of bank appraisal issues, and no risk that the bank won’t ultimately lend to the buyer. In other words, there’s no financing contingency.
Properties are often the last pieces left to close out an estate. That means time may be of the essence, and selling quickly—with the lowest possible risk—can enable the beneficiaries to receive the sale proceeds in a timely manner. It’s also true that trustees often just don’t want the hassle of property preparation and a lengthy sales process.
Be Careful of Quick Home Sales Offered to Heirs for Cash
But even when speed becomes important in a trusts and estates property sale, caution is needed when heirs get offered quick home sales for cash. Heirs to properties are frequently targeted by opportunistic cash buyers who may make an offer well below the fair value of the property with a promise of a quick cash closing—before the property is ever listed for sale. Indeed, trustees and heirs may be contacted by dozens of such operators after a property owner passes away. That can lead to bad decisions that leave money on the table, or worse.
Bottom Line: Do Your Research When Offered Cash for Real Estate
Regardless of your situation, don’t let the allure of a cash offer cause you to skip your due diligence.
For starters, we always recommend that a seller get an appraisal or broker opinion of value to confirm a fair price for the property. In our experience, the highest price is most often achieved when a home is listed and marketed to a wide range of prospective buyers, with quality preparation and staging. Only then, once offers are received, a legitimate cash buyer would be first choice if the price offered is the same.
No matter how legitimate the buyer may appear, it’s crucial to immediately verify that they genuinely have the cash available, and make them provide proof of funds. And yes, it sometimes happens that a cash buyer is unable to actually come up with the cash at the time of the closing. That’s why we always insist that a buyer submit a financial statement along with proof of funds—so that the seller can have confidence the money will truly be there when escrow closes.
Have a property you are thinking of selling in the New York luxury real estate market? Contact Morrel Hirsch & Advisors today, and let’s talk!
All the best,
Howard & Leslie
Howard Morrel and Leslie Hirsch are the founders and leaders of the Trusts & Estates Division of Christie’s International Real Estate Group, and the principals of Morrel Hirsch & Advisors, a leading New York luxury real estate team.