Cash Buyers: Where is All This Money Coming From?

Cash home buyers are individuals or companies that purchase properties using their own available funds, rather than relying on mortgage loans or financing from a bank or other financial institution. There seems to be an influx of cash offers in the market lately, which means I am getting asked a ton “where is all this cash coming from?” 

The truth is very few people are sitting on 400k cash in their checking account, that’s just not how it works.  The cash used for buying homes from these buyers typically comes from one or more of the following sources:

1. Personal Savings: Many individual cash home buyers use their personal savings or investment accounts to purchase properties.  Think Roth IRAs or other similar investment accounts.
2. Inheritance: Some cash home buyers may acquire funds from an inheritance, which they choose to invest in real estate
3. Sale of Other Properties: Cash home buyers may have sold other properties and are using the proceeds from those sales to purchase a new property.
4. Loans or Lines of Credit: Some cash home buyers might use loans or lines of credit from financial institutions or private lenders. While this technically involves borrowed funds, it’s still referred to as a “cash” purchase since the buyer has immediate access to the funds.
5. Liquidation of Assets: In some cases, individuals may sell valuable assets, such as stocks, bonds, or other investments, to generate cash for a real estate purchase.
6. BONUS: I’m definitely going to write an entire article on this one, but there’s also “effective cash”. What that means is people purchase property and waive their mortgage contingency making it so they still get a loan but not have it be reliant on the financing.

It’s important to note that cash home buyers can provide certain advantages to sellers, such as quicker transactions and more certainty in the sale process since they don’t rely on mortgage approval or financing contingencies. However, the source of the cash can vary widely from one buyer to another, and it’s essential for sellers to understand where the funds are coming from to ensure a legitimate and secure transaction.