Cash buyer vs. realtor: how to actually compare the two

The comparison people make, and why it's wrong

The instinctive comparison is cash offer versus asking price. That comparison is meaningless, because an asking price is a hypothesis and a cash offer is a commitment. The right comparison is net proceeds against net proceeds, adjusted for time and risk.

Net proceeds from a listing means the likely sale price, minus commission, minus seller concessions, minus repairs negotiated after inspection, minus your carrying costs during the marketing and closing period, minus your share of closing costs. Net proceeds from a direct sale means the offer, minus payoffs and liens, minus your attorney, and generally nothing else.

Costs sellers routinely forget

• Commission, typically several percent of the sale price, split between the brokerages involved
• Post-inspection repair credits, which are negotiated after you are emotionally committed
• Seller concessions toward buyer closing costs, which are common in some price ranges
• Carrying costs: mortgage interest, property taxes, insurance, utilities, snow removal and lawn care
• Pre-listing preparation: paint, carpet, cleaning, staging, storage, and the repairs you make to show well
• The cost of a deal falling through on financing and starting over

What each option is actually good at

A listing is good at price discovery. When multiple buyers want the same house, the market finds a number no single buyer would have offered. That is a real and often large advantage, and it is the reason most sellers of financeable homes should list.

A direct purchase is good at certainty. A fixed price, no financing contingency, no appraisal, no repair renegotiation, a closing date you help set, and no requirement to prepare the house. That certainty has a price, and the price is usually a lower gross number.

A rough decision rule