Wait! Read This Before You Sell Your Home for Cash

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Several companies now provide cash offers for homes with improved experiences for sellers. In addition, advanced technology is making cash sales easier without waiting months to list and close on your house.

Often, a divorce, job change, or financial situation can motivate sellers to go for the speed and convenience of a cash sale. Also, sellers save money on commissions, repairs, and closing costs.

Selling Your House for Cash

Selling your home for all-cash is very similar to trading in your old vehicle at a dealership rather than selling the car yourself. You will likely not make quite as much on the deal, but you also do not have to put in the work to sell the vehicle on your own by organizing test drives for potential buyers and handling all the paperwork yourself. If you sell your home the using the traditional method, you are more likely to need open houses, realtors, and a lot of paperwork.

However, there are still several steps to selling a house for cash. Here is an example of the process of selling a home for cash:

Request an offer

You have decided to sell your house in this step, most likely as-is. You are lookingfor a fast sale and do not want to go through staging and showing your home. Instead, you ask for a straight offer from buyers.

House is evaluated

The buyer evaluates the house with an onsite visit to determine how much they are willing to pay for it.

Review the contract

The next step is to review the cash-offer. This includes reviewingthe contract and terms.

Request Proof of Funds

There should always be documentation to prove the purchaser is who they say they are and have the funds to purchase the home all-cash.

Complete inspections

If proof of funds goes through, the cash buyer may then request an inspection, it all depends on the purchaser. So even if you’re selling “as is,” an inspection could still be required.

Closing on the house

There will be no lender appraisal or processing of a loan. This will speed up the process exponentially from around 50 days to just 10 to 14 days.

Clear title

A title search will then be completed to make sure the house is free and clear of any encumbrances that could hinder the sale.

Close the house

The buyer wires the funds to the seller’s bank, which takes weeks or days.

When you sell a house for cash without a mortgage loan, there are several steps. However you can usually speed up the process by not needing a lender.

Cash-for Home Companies

Several legitimate cash-for-home companies offer excellent service, but you should investigate before you send a contract or do business with these types of companies.

Here are a few rules of thumb:

Check their BBB rating.

Cash-for-home companies should be accredited by the Better Business Bureau (BBB). Look for the reviews on the BBB website to see customers’ experiences.

Ask for proof of funds and EMD

Asking for proof of funds is not a burden to the buyer and should be requested from their bank. You want to ensure the buyer has the cash on hand to buy the house.

Consult a real estate agent

Most agents will be familiar with cash buyers in their markets. Ask them for advice to receive an acceptable purchase price for your house. Many investors will purchase several homes for cash in the residential real estate industry.

Types of Cash Buyers

There are several types of cash buyers, including groups of cash buyers and house buying companies, each comprised of individuals or entities that buy houses without lender financing.

When selling to a cash buyer, you do not have to prep or stage your home for showings. Here are the types of cash buyers, all with their business models.

iBuyers

iBuyers stands for instant buyers. The business model is relatively new, originating in the 2010s. These companies use automated valuation algorithms to purchase houses in pretty good condition. Examples include Opendoor, Offerpad, and Redfin Now. These businesses usually pay more than investors and flippers and charge a 5% service fee since they make less per house than other types of investors. Instead, they focus on a high volume of homes with technology to streamline the process.

Buy and hold investors.

Buy and hold investors are typically individuals or investors purchasing homes to turn them into rental properties. They are looking for long-term investments with a monthly revenue stream from rents.

With buy-and-hold investors, sellers have more flexibility in choosing closing dates and will likely get a better price than selling to flippers.

House flippers

House flipping has become popular across the country. These businesses range from small mom-and-pop operations or larger enterprises. Flippers buy homes in somewhat to very poor condition, renovate the houses, and then sell them for more than they purchased.

Most flippers need at least a 10% return on their investment to make the purchase worthwhile. They will flip and re-sell the property as fast as possible as time is money.

Frequently Asked Questions

Why do people want cash only when selling a house?

Several reasons to sell a house for cash include speed, convenience, peace of mind, and financial motivations. These are the top reasons, but there are several more. Here are some examples:

• You are moving for a new job.
• You don’t have a desire to deal with the risk of a low appraisal.
• You don’t have time to make significant repairs.
• You don’t want to accept an offer with a lot of contingencies.
• You want speed and convenience.
• You inherit a far away house, which you are not familiar with.
• You have no desire to prep, stage, and show the house.
• You have an issue with the occupants in the home as a rental property.
• You have personal financial problems.
• You need fast cash for other needs or a new house.
• You do not have the money to make repairs.
• Your home is about to be foreclosed upon.
• You need the cash from the house sale to get out of debt.

What value does a cash buyer provide?

Working with a cash buyer offers several benefits that you would not receive otherwise. Here are the main advantages:

Closing is faster

When you use a lender, the closing time takes longer than a cash buyer. All-cash purchases close quickly because there is no mortgage being taken out by the buyer to purchase the house.

Move-out is flexible

Based on when you want to move, cash sales allow you to choose the timing in a week or a couple of months. You have to wait for a third party to approve a loan or appraisal in mortgage closings.

The sale is lower maintenance.

You do not have to stage or prep your house for the sale or clean regularly. Also, you do not have to deal with showings disruptions or have to do significant repairs to meet potential buyers’ expectations of how the house should look.

Expenses are reduced

Cash sales reduce expenses found in a traditional deal, such as repairing any damages, landscaping, staging, and commissions to realtors.

Do cash buyers offer less?

You will get a hassle-free and low maintenance sale but may get less money for your house with an all-cash offer. The variance will be based on the type of buyer you sell to, your home’s location, and the condition of your house.

Do you need to make repairs when selling a home for cash?

Cash buyers may still want you to complete several repairs before buying the house. Instead, they may not require you to pay for the repairs from your funds but will offer a lower purchase price for the home. The house buying company will calculate how much money needs to be invested into repairs and deduct that from their offer on the house.

Do cash offers fall through?

There are unique challenges in negotiating the sale of a cash house. In traditional sales, many individual buyers will put in competitive bids for the home. The decision is more personal, so there is more room for negotiation based on emotions. For all-cash buyers, most are looking for a direct profit, and the transaction is a business decision which makes negotiation a challenge.

Is it illegal to sell a house for cash?

The term “all-cash offer” can be misleading. It’s, in fact, illegal to buy a house with physical cash. However, you can buy a home using a traceable method such as using a cashier’s check or electronic bank transfer.

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

House-buying companies and investors will offer various amounts for houses based on the home’s condition, location, and price point. However, most real estate buyers have specific parameters as to which types of properties are most valuable to them. That means the value of your house will vary even among buyers who can pay instantly.

Most flippers will pay about 70% of their estimated ‘after repair value’ in hopes of returns up to 30% once they flip the home. iBuyers will pay closer to market value since their strategy is to buy homes in good condition in bulk based on returns analyzed by algorithms. The iBuyers also make returns with a service fee.

Buy and hold investors usually pay more than flippers but less than iBuyers. They look to make 8 to 12% on their investment.

How long does it take to close on a home with a cash buyer?

It can take up to 50 days or more to close on a house in a traditional sale. However, cash buyers can close on homes as soon as 7 to 14 days after showing proof of funds.

Should I accept a cash offer for my house?

If speed and convenience are your top priorities, selling your house for cash can be the right choice.

Companies that buy homes for cash are growing and will continue to be present in the market. They are popular with several types of sellers. iBuyers especially are becoming more mainstream with technology to quickly determine the best houses to invest in and make large profits. An iBuyer may be a good choice for an all-cash sale for those with homes in good condition.

Summary

There are many reasons selling for cash can be a good idea. First, there is a need to sell the home fast due to financial circumstances, a job move, or a divorce in most cases. Cash-for-home sales make the process fast and efficient without hurdles. There are typically no fees for repairs or cosmetic improvements necessary for traditional sales. Also, there is no lender involved, so the time for the bank to conduct an appraisal and issue a loan to a buyer is non-existent. In addition, depending on the condition of your home and who you sell to, you may receive a reasonable purchase price.