If you’ve had the thought, “I need to sell my house fast” or “I need to sell my house for cash”, you’re not alone. Many homeowners at some point find themselves thinking about this option and wondering if it is the best path for them. This is especially true for anyone who has seen those signs that say, “We Buy Houses for Cash” or “We Buy Ugly Houses“.
Will they buy my house, too? you ask yourself among many other questions, and in this article, we’ll answer a few of those more common inquiries.
– What does it mean to sell your house for cash?
Selling your home for cash comes with a few perks that are similar to trading in your old car for a newer one. You might get a little more money if you were to sell it on your own, but it would probably end up taking a lot longer, and it would require you to do more of the work yourself. You would need to do things like make minor repairs, advertise the home and get potential buyers to view the property and more. That can be said both about selling that old car to a dealership and selling your house for cash, too.
In clearer real estate terms, selling your house for cash looks like the following:
– Requesting an offer. You can skip having to stage and show the home to make it as attractive as possible and instead move straight into getting a home cash offer. At this point, you can state whether you’re selling it as-is without the intention of making any repairs, or you can state that you’re open to completing repairs.
– Home evaluation. The buyer will get some info on the home and possibly have someone come and visit the property to see it for themselves and decide what they are willing to pay for it.
– Look at the contract. You will look at the offer that is given, which includes the terms and the price, and then decide if you want to accept.
– Ask for proof of funds. You’ll need to get documents stating the buyer is who they claim to be and really do have the money needed to buy the property.
– Finish inspection(s). If the deal does move forward, the cash buyer can still do things like having the property appraised or inspected. Even if you choose to sell the house as-is, an inspection might still be required.
– Closing. Without a lender involved, there will be no appraisal ordered by the lender slowing down the sale, nor will there be a processing period for the loan.
– Clear title. The cash buyer will need a title search to ensure you can transfer the property without any judgments or claims against the property, including unpaid taxes, a mechanics’ lien or boundary encroachments.
– Getting paid. When all is clear, the buyer will usually wire the money to your bank account, which could take only days or a handful of weeks.
In conclusion, selling your home for cash doesn’t mean that a person arrives on the stoop with a duffle bag of cash. You’ll still need to complete a few steps, but when the buyer doesn’t have to sit around and wait for the lender to do anything, you can usually get it done a lot faster.
– Are cash-for-home companies legit?
Generally speaking, the answer is yes. There are a lot of companies out there that are legitimate and buy homes for cash, give a good experience and make good on their promises. Of course, it’s important to always do your due diligence on any buyer before you give them any information, send any money or put your signature on paper.
To vet a potential company, consider the following steps:
– Check their Better Business Bureau rating. No matter what kind of company you end up working with, be sure it is an accredited BBB member. Look for things like timely responses to complaints and overall positive reviews.
– Ask for proof of funds. Ask for official proof of funds from a potential buyer’s bank and then get a confirmation that they can offer earnest money before doing anything else. The earnest money serves as a deposit that indicates that the buyer is seriously interested in buying the home.
– Talk to an Agent. Talking to an established real estate agent will usually be able to give you an inside look at who’s who when it comes to the local buyers, which can help you sidestep any low balls. Many investors reach out to homeowners to attempt to buy their homes for cash, so it’s important that you don’t just accept whoever comes knocking. It is important to ensure a buyer is legitimate and can make a solid offer for your home. You can do this by talking to a professional real estate agent.
– Who will purchase your home for cash?
As a group, home buying companies or cash buyers who may purchase your home outright without the need for lender financing are the ones who like to do all-cash deals. Generally speaking, selling your house to a cash buyer usually lets you skip the home preparation, staging, showings and other stressors while also enjoying a more flexible closing time, which can be coordinated with the purchase of your new house. Still, not all-cash buyers use the same business models.
Below, you’ll find three of the most common categories of cash buyers that you’re likely to encounter:
– iBuyers –
iBuyers was not much of a thing at all until the mid-2010s, but now they are quite popular. They use automated valuation models, sometimes just called by their acronym, AVM, to submit competitive offers on houses that are in better condition. They often will pay a higher price than buy and hold investors or flippers but will charge a service fee of around nine percent. Because iBuyers usually take home less profit, their business tends to rely more on getting a large number of homes using their technology.
iBuyers have, in the past, usually paid anywhere between 93 percent and 96 percent of the market value, but sometimes, they will also pay over the market value if they are in an extremely competitive market. Some iBuyers will even cut both the concession fees and service fees for repairs to make them more attractive options as well. These lower fees help reduce the overall cost of doing business with iBuyers, making them a more popular model for modern-day home selling. They tend to also offer a lower purchase price to homeowners who are more concerned with making a quick sale than anything else, which also contributes to their success.
– Buy and hold investors –
Buy and hold investors are those who like to buy homes and then convert them into rental property, so they can charge rent and continue to make passive income off of them. Sometimes, these buyers will sell a house once it has appreciated or grown enough in value over time. other times, they will continue to hold onto it for an indefinite length of time until they think they can make the most profit. This gives them their name.
In this category of homebuyers, some individual investors will buy and rent properties to keep this passive income flowing. On a larger scale, there are also what are known as institutional investors that buy a minimum of 10 rental properties annually. These are known as institutional investors. In the second quarter of 2020, institutional investors were responsible for as much as 4.6 percent of the single family purchases in the USA, which is the highest level since 2015. When you decide to sell to a buy-and-hold investor, you will have more flexible closing dates and will usually be able to enjoy better pricing than if you chose to sell to a house flipper.
– House Flippers –
The name “house flippers” probably seems pretty self-explanatory. You’re likely also familiar with what they do, as house flipping is a common theme on real estate networks and shows. House flipping means buying a house that is usually in poor condition so that it can be purchased at a lower price, renovated and put back on the market to sell for more money. This is known as house flipping. The minimum return on investment for this kind of buying will depend on a few things such as the condition of the home and the market, but usually, there needs to be a 10 percent return on a purchase to make it feel worth it to the flippers.
Though flippers usually prefer to renovate their purchase and then sell it again as quickly as they can, the actual time needed to get the home ready to list can be different each time. When a market is busy and hot, contractors are usually very busy, so it can take twice as long to get a home fixed up as it usually does. It was reported that in the first quarter of 2021, more than 32.5K homes were flipped. The number of homes that were bought with cash was 59.2 percent.
– what reasons would someone want to sell their home for cash?
There are a few reasons that someone might sell their home. This could include convenience, speed, financial motivations and peace of mind. To get a better idea, we can break that down a little.
Those who sell their homes for cash and need the certainty of the deal. They:
- could be moving for a new job and need to arrive at the new location by a certain day, meaning they can’t wait around for an uncertain amount of time in a traditional home sale.
- Might not want to deal with any risk of a low appraisal.
- Won’t have to hire any contractors or make any big repairs.
- Might feel nervous about accepting an offer that comes with a lot of contingencies from a traditional buyer.
Those who prioritize speed and convenience may find themselves in the following situations. They:
- are inheriting a house they aren’t familiar with, don’t want or is too far away to take care of or live in it.
- may not want to disrupt one’s life by preparing, staging or showing a house.
- may have problematic rental properties they want to get rid of.
Those who have financial motivations might. They:
- need cash for a down payment on a house they want to buy.
- not have the money to make all of the necessary repairs the buyer wants.
- find themselves facing foreclosure on their home.
- need the money to help get out of debt.
– What value does a cash buyer provide?
Do many people wonder what someone gets out of working with a buyer that is paying in cash that they might not receive in any other situation? There are a few main benefits that attract people to enter this kind of transaction. A few of the most common ones are listed below.
Faster Closing Times
If your buyer has to borrow the money from a lender, this will affect the homeowner who is selling the home. This is due to the fact that suddenly, everyone will be on the lender’s timeline, waiting around for them to make their move. This can usually last as long as six weeks. All-cash deals do not involve lenders. Because there aren’t any lenders you have to work around, the timeline is often shortened. Beyond that, a cash buyer’s offer won’t rely on your home appraisal being a certain amount, which can also speed along the process.
Flexible Move Out Dates
When you sell your home traditionally, you don’t often get to choose the day of closing. Beyond waiting around for various issues, such as the lender taking care of repairs and an inspection, there are other factors dealing with a timeline that is difficult to predict, making it harder for you to secure a concrete closing date. With a cash sale, you have much more wiggle room and flexibility. This circles back to some of the steps that you can skip when doing a cash deal. With cash, you can enjoy more flexibility on the date that you close since you aren’t just waiting on a third party to get everything approved for you, such as in the case of an appraisal or a loan.
Low Maintenance Sale
When you have a cash offer, you don’t have to worry about issues like keeping your home in perfect, spotless condition for weeks at a time in case someone wants to view it or disrupting your schedule in any way to make time for showings and open houses. Furthermore, you can decide to sell your home as-is, which can allow you to skip any pre-listing projects, including landscaping, roofing and painting. It is up to you how much work you want to put into the home before selling it when you do it with care, where traditional buyers will hold higher expectations for how the house needs to look.
Lessened Expenses
A cash offer can get rid of a lot of the expenses that come with home selling, such as curb appeal projects, repairs, commissions, staging and other such tasks.
– Are there any downsides to selling a house for cash?
Much like with anything else, there are a few drawbacks that you may want to consider before rushing into making a cash deal.
Lower Price
In order to enjoy a faster, less stressful sale, the tradeoff you make is getting less money for the home. Just how much less will depend on some issues, such as the kind of buyer you sell to, the condition of your home and where you are located. Even with iBuyers paying more for homes, their fees can still chip away at your profit.
No Avoiding Repair Issues
One of the biggest draws of selling for cash is that homeowners don’t have to bother with repairs. Though you won’t need to deal with any repairs right out of pocket, you might still have to settle for a lower price on the home all the same. In a lot of cases, a home buying company will see how much they need to spend on repairs for the home before finalizing the offer. This cost will be deducted from their offer.
Negotiating is Harder
When you list your house on the open market, you will probably receive offers from more than one person, and this could make it easier for you to negotiate for a good price. With a cash buyer, there is usually no way to negotiate, because cash buyers don’t have any sentimental or emotional reasons they can see themselves in the house. For them, it’s only business.
– How much do Home Investor cash buyers pay?
Depending on certain factors like your location, price point and the condition of the home, the property will be more desirable to some cash buyers compared to others. Many real estate buyers have a certain “buy box” they follow with certain guidelines about what they are looking for. This means what your home is worth to buyers will vary from person to person.
House flippers usually use what is called the 70 percent rule. This states that a flipper should pay 70 percent of the After Repair Value of a house. iBuyers will pay a price more in line with the market value, usually matching or exceeding it, since they seek homes in new and good condition. They will charge a service fee, but it can often be quite low.
Buy and hold investors tend to be somewhere in between. They usually will pay less than iBuyers but more than flippers and try to make between eight and 12 percent on their investment.
Overall, the discounted price you should be expecting to pay for a cash sale can vary widely. The better the neighborhood, the better the home’s condition and other factors will help you get a higher offer closer to market value. If there are problems for the buyer to worry about with the home, the lower the offer is likely to be.
– How long does it take for a cash buyer to close?
The final hurdle in a typical home sale is ensuring that a buyer’s financing is actually there, and it can be a time-consuming ordeal. Recent data indicated that it has been taking an average of 51 days to close a sale for those with a loan, coming out to nearly two months of waiting around. On the other hand, cash buyers have a lot more flexibility and agility. A company that buys homes for cash can show you their proof of funds in no time and can close the deal in as few as 10 days.
– Is selling for cash a good idea?
If convenience, speed and certainty are important to you, selling your house for cash might be a great option. One of the biggest things a seller wants to do is get rid of any uncertainties surrounding the sale, and cash is one of the best ways to do that. Cash gives a person a lot of leverage and flexibility, which can significantly impact the buying and selling experience as well as the power of negotiation.
Companies that buy homes for cash aren’t going to go anywhere anytime soon, and they are growing in popularity. This means you practically have plenty of time to decide if this is the best method for you, and you can count on a cash for homes buyer being ready to talk to you at any time. It is believed that iBuyers especially will become more mainstream and popular in the coming years thanks to technology making it easier to sell a house virtually. When issues suddenly get in the way of the usual flow of things, such as a pandemic, buying online actually becomes more valuable.
At the end of the day, selling a home for cash and the method you use are decisions that are totally in your hands and depend on your unique situation.
