Home sellers are interested in all-cash offers for one simple reason: it means there's no doubt that you have enough money to close the deal.

All-cash homebuyers have a distinct advantage over those who need a mortgage because there is no guarantee that the lender will come up with the money. Many factors, from a subpar credit score to a bad home appraisal, can prevent this from happening.

All of these eventualities can be eliminated with an all-cash offer; it's the best deal with no strings attached.

While you might think that only millionaires have enough money to make an all-cash offer, such deals are surprisingly common.

According to a recent report from ATTOM Data Solutions, all-cash offers accounted for 34 percent of single-family home and condo sales in the third quarter of 2021. And they're not necessarily the rich and famous: Some buyers are retirees, while others are savvy home sellers who have gained enough equity in their homes (and other investments) to put up an all-cash offer.

But should you always make an all-cash offer if you can?

As it turns out, despite the many benefits, an all-cash offer is not always the best option for every home buyer. Here's how to determine if an all-cash purchase makes sense for you, and how to do it right.

Should you make an all-cash offer?

Just because you have the money to buy a property doesn't mean you have to do it. Making an all-cash offer has both benefits and some lost opportunities. This explains why even extremely wealthy people (like Mark Zuckerberg!) ) buy a home with a mortgage when they clearly don't need it.

Let's take a look at what an all-cash offer can get you and what you give up.

Advantages of an all-cash offer:

You're in a tough seller's market. If a home bidding war breaks out, an all-cash offer can help you stand out from the competition by pushing your offer to the top of the list." Greg Beckman, a real estate agent in Annapolis, Maryland, says, "All-cash can be an advantage when it comes to shortening escrow and eliminating some contingencies.

Depending on your market, an all-cash offer can strengthen your negotiating position and convince sellers to accept less than their full asking price. However, "in today's low inventory seller's market, don't expect to get a crazy good deal just because you're paying cash," Beckman says." But if you're not in a bidding war, you should be able to get a house at a lower price."

If you're in a hurry, an all-cash purchase can also simplify your home buying process because there's less paperwork and no delays in mortgage approval.

Without a mortgage, you can actually save on closing costs, title insurance and other mortgage-related fees. No mortgage also means no money wasted on mortgage interest for the next 15 or 30 years.

It may seem obvious, but let's say it anyway: owning a free and clear home means no mortgage payments! You never have to worry about your home being in trouble! You never have to worry about foreclosure (the lender taking over your home) because you haven't made your mortgage payments.

Disadvantages of all-cash offers:

You'll be tying up a lot of money in one asset rather than diversifying your financial portfolio.

Your purchase may significantly limit your liquidity.

You'll miss out on sizable tax deductions. (For example, homeowners with mortgages can get a tax deduction for mortgage interest).

Your money may be better invested elsewhere (depending on how aggressive you want to be with your investments).

How do I make an all-cash offer without getting ripped off?

While an all-cash offer has many positive qualities, there are still some pitfalls that you want to avoid. Here's how to do just that.

Keep your money in one place. You can use cash from a variety of sources to buy a home, including personal savings, cash gifts and inheritances, but keeping the money to buy a home in one account makes it easier to keep track of the money you will need. Plus, since there can be delays in bank transfers, you don't want to move funds around shortly before closing.

Provide proof of funds. When you submit your offer, you must provide the home seller with a copy of your bank statement as proof of funds.

Don't forget about your other home buying expenses. Even if you plan to buy a home with cash, you still have to budget for any costs associated with the purchase, including the following:

Property taxes: They depend not only on the assessed value of the home, but also on where you live. (See How to Calculate Property Taxes).

Homeowner's Insurance: The average annual premium is about $1,820, but there are many factors that can be used to calculate the cost. (See How to Calculate Your Homeowner's Insurance).

Homeowner or condominium association fees: For a typical single-family home, homeowner association fees are about $200 to $300 per month.

Home Inspections: According to the U.S. Department of Housing and Urban Development, a typical home inspection costs $300 to $500, but fees may vary. (See our list of home inspections).

Don't completely deplete your savings. Buying a home with all cash shouldn't leave your bank account bottomed out!

Staci Titsworth, regional manager at PNC Mortgage in Pittsburgh, recommends building an emergency fund that will cover at least six months of living expenses. If you have extra cash after that, you're better off putting it into a retirement account, because a home alone shouldn't constitute your entire retirement.