Companies That Buy Houses for Cash – Pros and Cons

Buying a property for cash comes with many benefits, including the reduction of closing costs and time. 

Table of Contents:

Is a cash house buyer legit?

Is it better to sell a house to a cash buyer?

How much less should you offer on a house when paying cash?

Do cash buyers offer less?

Who pays closing costs in cash sales?

Why is an all-cash offer better?

Why are there so many cash buyers?

How do I make a cash offer without a realtor?

Why is cash better when selling a house?

Can a cash offer on a house fall through?

Are there closing costs with a cash offer?

Can I buy a house in cash and then get a mortgage?

Are cash buyers better?

Summary

Is a cash house buyer legit?

A company that acts as a cash house buyer is a company with sufficient funds to place an offer on a property and purchase it subsequently using cash. Many cash home buying companies are legit. In fact, some of the biggest real estate companies looking to purchase houses and fix them up to sell them will offer cash as an incentive to the buyer. Two of the biggest cash home buying companies include Webuyanyhome and HomeVestors, also known as We Buy Ugly Houses. The way that these businesses work isn’t only legitimate but they are simple to use, which further incentivizes homeowners to sell their homes to them for cash. 

Is it better to sell a house to a cash buyer?

According to some sources, selling your house for cash may be better than selling it to a buyer that needs a mortgage to make the purchase. The reason for this is that cash sales for houses tend to result in far lower closing costs. Some of the closing costs you’re likely to save on include:

• Appraisal fees
• Document fees
• Credit checks
• Mortgage closing costs or loan origination fees

While most of these fees directly relate to costs that the buyer of a house will need to bear there are also benefits for the seller as oftentimes the seller will also get to save money if the closing costs are lower. 

How much less should you offer on a house when paying cash?

When placing a cash offer on a home you may feel as if it’s a wise choice to make a lower offer than the one you would have put through if you were using a mortgage. However, for the seller of the house, there are very few differences based on whether you’re paying with cash or a bank. The main difference when a seller accepts an offer from a cash house buyer is that the funds are certain and as such, they may be able to proceed with closing much faster than they would have otherwise been able to. Another difference is that a cash buyer is far more likely to agree to waive the appraisal and inspection, which could lead to lower closing costs for both parties. However, neither of these differences are usually enough to justify an offer lower than the one the seller is asking for. Depending on the urgency with which the seller is looking to close on the house sale you may find that there is a difference in how much they are willing to sell their property for. Therefore, if you send through an offer for a much lower price, it’s often the case that the house seller will choose to negotiate that sale regardless of whether you’re paying with cash. 

Do cash buyers offer less?

Some cash buyers offer less than the asking price for a home. While there is no concrete reason for this one of the most important factors that lead to the sale of properties for lower cash offers rather than for financed offers is the speed of closing on the house. Cash sales tend to be much faster and for that reason, any seller who is urgently looking to sell their home may be inclined to proceed with the sale for a price much lower than the one they were originally asking for. Research has shown that up until 2017, houses purchased with cash could be bought for as much as 12% lower than the final cost of similar homes. Still, not all sellers will agree to a price lower than their asking price just because the offer is made in cash. This is something that buyers need to consider as not all sellers are looking for a fast sale and many sellers are happy to wait for a buyer that will give them a higher offer. 

Who pays closing costs in cash sales?

The closing costs are typically associated with the buyer, however, there are certain closing costs are handled by the seller. Closing costs relating to any HOA fees or insurance for the house that you’re purchasing will typically fall with the buyer. Whether the sale of the process is paid for in cash or paid for through financing the responsibility of the closing costs doesn’t shift from the buyer to the seller. However, there are occasions in which the closing costs can be negotiated with the seller so that parts of them can be split between the buyer and the seller. 

Why is an all-cash offer better?

An all-cash offer can give the buyer more power as many sellers are willing to negotiate the price of their home more if there is cash available. What’s more, sellers looking to make a fast sale will often choose to go for a cash offer as they tend to be faster in the closing procedures. This is partly because there is no period of waiting around for mortgage approval. Finally, as a buyer, if you’re looking to make a cash purchase you will not be limited by contingencies set out by a lender. This often means that you can bypass the appraisal and just proceed with the purchase. This could save both the seller and the buyer some money and it could also result in a much faster closing procedure. 

Why are there so many cash buyers?

The reason for the existence of more cash buyers in the last year is often attributed to a stock-market boom which has allowed several buyers to proceed with cash rather than requiring them to use a lender to close on a house purchase. Depending on the area and the state that the buyers are in they may be less or more likely to buy a home with cash. This is because in more expensive areas like New York or San Francisco the amount required for a cash purchase is much higher than the amount required in Florida. As a result, that means that in those areas more houses are bought up through a mortgage. 

Percentage of House purchases made with cash (top and bottom five areas) 

• West Palm Beach, FL -53%
• Naples, FL -53%
• Nassau County, NY -50%
• North Port, FL -49%
• Port St. Lucie, FL -46%
• San Diego, CA -16%
• Los Angeles, CA -16%
• Richmond, VA -16%
• Oakland, CA -13%
• San Jose, CA -13%

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How do I make a cash offer without a realtor?

Whether you can submit a cash offer to the seller without a realtor will depend on whether the seller is using a real estate agent for the sale or whether it’s a home for sale by the owner. If the house is available for sale through a realtor, then it’s to them that you must submit your offer for the home, even if it’s a cash offer. If on the other hand the sale is made without the use of a realtor you can submit your offer directly to the seller. The seller will then be the one to assess it and negotiate it directly with you. It’s important to remember throughout this process that while a cash purchase is often preferred by homeowners looking to make a fast and sure sale, many homeowners will not agree to lower offers just because you’re offering cash, so it may be the case that you will need to send through multiple offers before one is accepted. 

Why is cash better when selling a house?

If you’re a home seller and you’re considering selling your house for cash, then you may be wondering why cash is better for you. The reason is quite simple. Cash is a sure thing. If the buyer is willing to place a cash offer it means that they know for a fact that they have enough money to fulfil it. It also means that as a seller you will not need to wait until a lender approves of a mortgage. Depending on the buyer’s request it may also be that the buyer will choose to waive the appraisal reducing in this way both your closing costs and closing time. As a seller, these are all benefits that you may want to consider when agreeing to a cash offer. 

Benefits of cash offers: 

• Faster closing time frame
• Buyer may place fewer contingencies and may not require an appraisal 
• The certainty that the deal will go through 

Can a cash offer on a house fall through?

Regardless of whether an offer is made with a mortgage or with cash, there is always a chance that the deal will not go through before closing. For a buyer having enough cash isn’t always enough, that cash needs to also be liquidated and available to be moved out of their bank account and into the pocket of the seller when the offer goes through. If for whatever reason the buyer is unable to in the end transfer the cash amount to the seller then the sale will go through. If the buyer also chooses to back out of the purchase, depending on the contingencies in place, the seller will be left without a buyer for their property. While it’s more unlikely that a cash deal will not go through, there are occasions in which the buyer will back out or won’t close on the house. This is something that every seller needs to keep in mind when going ahead with a sale. 

Are there closing costs with a cash offer?

Even if you’re closing on a house and using a cash offer you will still be required to pay for the closing costs. What will be different is that there are many of the closing costs associated with a mortgage that you will not be required to pay for as you will be using cash to purchase the home. This could lead to a large reduction in the closing costs as you will not need to pay for the application fees, courier fee, credit reporting fee, loan origination fee, or the FHA Mortgage Insurance. The fact that all of these costs are not included in the closing costs will help greatly reduce the amount that as a buyer you’re meant to pay after your cash offer has been accepted. 

Can I buy a house in cash and then get a mortgage?

Delayed financing is an option that allows cash buyers to get a mortgage after closing on their new home. This is like a cash-out refinancing of their home and essentially, it’s a mortgage that gets put in place after the purchase of the house has finished. Some cash buyers choose to use delayed financing as they can benefit from making a cash offer and then they can restore some of their cash liquidity by getting a mortgage. The application process for delayed financing is like the one used for a normal home loan. As such similar paperwork needs to be completed for the mortgage to come through. 

Are cash buyers better?

For sellers, cash buyers can be better in situations where the seller is looking to make a fast sale. What’s more cash buyers tend to be a sure deal and as such it’s much more unlikely that a deal with a cash buyer will fall through before the closing. For this reason, many sellers agree to lower offers from cash buyers to sell their homes faster. 

Summary

Cash offers can be better for sellers who are looking to sell their homes fast. However, as a buyer, you should not assume that just because you’re offering cash a seller will agree to a lower home price. As such, negotiations may still be needed before an agreement for the sale of the house is made. For the buyer, a cash offer can come with its own set of benefits as it can help give them negotiating power and reduce their closing costs.