What you have is a house. What you need is cash. The bills are stacking up or perhaps you lost some income recently, and the money tied up in your home would help a ton at a time like this. If only there were a way to — poof! — turn four walls and a roof into money in the bank, without the need for inconvenient showings, nail-biting appraisals, or a 50-day closing.
Absent a magic wand, you do have the means to get cash for your home in quick order. The main method is to request a cash offer from an investor or cash-buying company that will likely purchase your home “as is.” To do that, you’re looking to work with a legitimate buyer who sees value in your home and is able (and willing) to front the funds for it, allowing you to get cash out of your home quickly and ideally at a decent value.
Reports from the National Association of Realtors show that nearly a quarter of existing home sales were made with all-cash in the spring of 2021 — but how do you go about finding your cash buyer? Follow these steps that we put together with the insights of experienced real estate experts. Our guide aims to address the urgency of needing cash with the level of thought and care that a sale of this weight requires.
Step 1: Evaluate your house through a cash buyer lens
Your buyer could be an investor who plans to turn your home into a rental, an iBuyer (instant buyer) that provides quick offers online, or a house flipper who plans to remodel and resell the property for a profit. Although it’s not as sure of a bet, you could also attract a regular residential buyer who has enough liquid assets to buy a house outright. Here’s a little background on what cash buyers tend to prioritize and look for when they make an offer, according to experts in the real estate and investing industry we spoke with directly.
Brian Martucci, a personal finance expert for Money Crashers, says that cash buyers tend to target the types of properties and sellers that reinforce the inherent advantages of their strategy. “They look for motivated sellers who want to close quickly and avoid the potential complications of financing or sale contingencies, even if it means accepting a lower offer price,” he explains.
In terms of the type of property, Martucci says that single-family and small multi-family properties with good investment potential — either as rentals or flips — tend to attract cash buyers, whether they’re smaller-scale landlords, flippers, or bigger house-buying companies.
Jeff Shipwash, CEO of a real estate investment firm in Knoxville, Tennessee, flips more than 15 homes per year and also purchases several homes with cash to hold for rental. When looking for properties to buy, he focuses on single- and multi-family homes rather than vacant land or mobile homes because they allow for “value-add.”
“Value-add is the process of remodeling a home or complex to increase the value and add equity,” Shipwash explains. “In addition, these properties allow for multiple exit strategies for investors, including flips, short- or long-term rentals, or wholesales.”
That makes distressed properties — houses that are in foreclosure or old homes that require extensive repairs or updates — attractive to investors. They can purchase a property at a discount, providing value through a quick sale to the owner, and leverage their funds and expertise toward a profitable renovation.
“When we talk to sellers, one of our first questions is, ‘When was the last time the roof/kitchen/bathrooms/flooring were updated?’” says Andy Kolodgie, a real estate investor in Washington, D.C.
“This gives us a good idea of the condition of the property, so we know where we can provide value in the sale. If the whole house has been renovated recently and the seller wants full market value, they’re typically better off working with an agent.”
Within single- and multi-family homes, material matters. Scott Harvell, investor and owner of Quick Sale Homes in Jacksonville, Florida, says that concrete block and brick homes are more appealing than wood-framed homes because they tend to last longer and are less likely to have major structural issues.
Strategic price point
Lisa Jackson, a seasoned real estate agent in Pittsburgh, Pennsylvania, sees cash buyers gravitate primarily to single-family, starter-type homes priced around the $200,000 range or less.
To recap, if your home falls into one or more of these categories, you stand an exceptional chance of appealing to a cash investor:
- Single-family or multi-family
- In need of renovations or updates
- Priced in an affordable range
- In a state of pre-foreclosure, foreclosure, or repossession
- Made from durable materials
But even if your property doesn’t check one of these boxes, selling to a direct cash buyer isn’t out of the question.
Step 2: Research your local cash buyer market
You’ve no doubt seen those signs on telephone poles, proclaiming promises like “sell your house for cash — fast!” While you can certainly start by calling the numbers on those signs, you do have other avenues to explore when seeking a cash buyer in your area.
Work with a real estate agent
While it might seem that selling to a cash buyer and working with a real estate agent are mutually exclusive options, an agent could be a valuable resource for legitimate investors in your area. “Many experienced agents have access to real estate investor networks that are invisible to regular homeowners, mainly because smaller-time landlords and flippers don’t advertise,” says Martucci of Money Crashers.
Working with an agent to find a cash buyer will have its pros and cons. “The benefit is that the agent should be able to ‘weed through’ the cash buyers to figure out which ones are legit and have funds to close on the property,” says Harvell. “The negative is that the agent will still need to get their commission. Whether that fee is paid directly from the homeowner or from the cash buyer, it will still result in less money in the seller’s pocket.”
Jackson, speaking as an agent herself, agrees that working with an agent will put you in a position to get the best possible price for your house. “An experienced, knowledgeable agent who consistently sells homes is likely to have a handful of cash buyers who have bought homes from them in the past,” she says. Plus, as with any real estate transaction, the agent can act as your advocate throughout the transaction, guiding you through the paperwork and processes.
Connect with a digital-savvy house-buying company
If you don’t have time to track down, research, and interview local investors, one alternative is to reach out to an online house-buying company for a quote. Rather than aimlessly searching for a cash buyer on Google, we’d recommend going through HomeLight’s Simple Sale platform. Through Simple Sale, HomeLight provides you with an all-cash offer for your home.
Here’s how it works:
- Answer a few simple questions about your home.
Tell us a few details, such as whether your home is a single-family, condo, townhouse, vacant lot, or mobile home. We’ll also ask about when your property was built, your assessment of its condition (whether it needs nothing, needs a little work, needs significant work, or is a tear down) as well as how soon you’re looking to sell —it could be ASAP or in 12+ months. In addition, you’ll be able to share a bit about your selling motivations, which could be unloading inherited property, selling a second home, or just looking to get cash quickly.
- We’ll provide an all-cash offer in as few as 48 hours.
You won’t be obligated to accept any offer you receive. If you’d like, HomeLight can also introduce you to a top real estate agent in your neighborhood for an expert opinion on what your home is worth.
- You sell your house in its current condition.
No additional repairs, prep costs, agent commissions, or hidden fees. This can save you time and money —a study we conducted found that on average, homeowners spend nearly $5,500 prepping their home for the market. If your home is in rough shape, those costs could total significantly more.
- You can sell your house fast with cash in as few as 10 days.
A 10-day closing translates as getting your home sold around five times faster than with a buyer who needs financing in today’s market. According to the latest data from Ellie Mae, the purchase loans are taking an average of 50 days to close as of May 2021. You’ll have the ability to pick a move date that works best for your schedule.
Be careful of signing with a wholesaler
For sellers seeking cash buyers, one of the biggest challenges will be distinguishing between the direct real estate investment companies and the wholesalers, says Harvell. Wholesalers may come across as being the same as other cash buyers, but they actually have no funds to close on a property. Instead, their ultimate goal is to sell the contract to someone else for more money.
“The risk to the homeowner is that if they sign a contract with a wholesaler, and the wholesaler cannot sell that contract to any other company for more money, they will need to lower the sales price or back out of the contract,” warns Harvell.
Step 3: Vet the buyer
If you’re considering working with a prospective buyer — particularly if you found them via an internet search or an advertisement — a little legwork on the front end can save you plenty of hassles and headaches later.
Triple-check their online presence
“Dive deep into their Google reviews, as well as reviews on other platforms,” recommends Shipwash, the CEO of the Knoxville, Tennessee-based real estate investment company. “Is their website credible? Do they have their names and photos of themselves on their website? Companies that are legitimate buyers take pride in their work and their websites. If the website looks clean, easy to navigate, and clearly defines and shows who owns the company, they are more than likely a dependable buyer.”
Put a voice to a name
Beyond doing your due diligence online, it’s also a good idea to pick up the phone and put a voice to the business. Kolodgie receives several calls each week from sellers who weren’t ready to fill out his company’s cash offer form but were interested in making a personal connection before providing their property information.
Verify past sales
Harvell also suggests getting concrete proof that the buyer has purchased properties in their name as part of the vetting process. “I’m not talking about a ‘proof of funds’ letter — those are easily manipulated,” he says. “If a buyer has bought properties, they should be able to provide closing statements, public records showing they own properties or similar proof.”
Check the validity of the business
Shipwash recommends looking on your state’s government website to verify that the buyer is an active business in good standing. “When searching the state’s database, you should see that the company is active and that no impeding allegations exist,” he says.
“If a company has a website but is not registered within your state, that’s a red flag.”
Step 4: Research your home’s fair market value
When you’ve started communicating with buyers and cash offers start to trickle in, how do you know which are worth considering? The key is to first get an idea of your home’s fair market value, which is the price it would likely command if it was listed on the open market.
Check your home value online
To get an instant approximation of what your house could be worth on the open market, you can check HomeLight’s Home Value Estimator. Just enter your address, answer a few quick questions, and receive an estimation of value in as little as two minutes. Keep in mind that online home value estimations are a great starting point for determining home value, but a real estate agent will take you a step further as far as accuracy.
Get a CMA from a real estate agent
A top real estate agent can help determine your home’s worth by performing a comparative market analysis. The CMA does a deep dive into how your property stacks up against the sale prices of nearby homes that are similar in size, style, age, and features.
Order a home appraisal
Alternatively, you could opt to pay for an official home appraisal. In a mortgage-backed transaction, a lender will require an appraisal as a condition of financing. But home appraisals have other uses. You can opt to order one independently as a means of comparison for any cash offers you receive. A home appraisal is one of the most trusted home valuation methods in the industry as it usually involves an on-site visit from the appraiser and rigorous reporting, but expect to pay $450-$550 for the services of a professional appraiser.
Use your value estimates as a point of reference
Once you have a sense of the value of your home, you’ll be able to better determine fair and decent offers from lowballers. Keep in mind that house flippers tend to stick to the 70% rule, which requires that they should pay no more than 70% of a property’s ARV (after-repair-value), including any costs for repairs and upgrades. But other types of investors, such as those pursuing rentals or online companies that may target properties in better condition, could offer closer to 85%-90%.
Step 5: Review offer details and choose the best one
When reviewing multiple cash offers, the best one might not always be the highest number. While price tends to take center stage, many other components of an offer should be considered before entering into a contract.
Verification of funds
Jackson, the top real estate agent in Pittsburgh, stresses the importance of making sure the buyer has enough funds available to purchase the property. Proof of funds, according to Investopedia, is a document demonstrating that a person or entity has the necessary funds and abilities to complete a large transaction. The documentation typically needs to come from a bank or some sort of asset statement.
According to Shipwash, some home-buying companies will agree to pay all of the closing costs, which could save you thousands of dollars. Harvell says it’s important to make sure that none of the normal closing costs are included in the sales price. “Some investors are starting to sneak the closing costs back in, so their purchase price appears to be higher than their competitors,” he says.
Earnest money deposit
As is the case with a regular retail home purchase, a cash buyer should provide an earnest money deposit (EMD) as a show of good faith that they will indeed purchase the property.
“You want your cash buyer to have some skin in the game by putting at least 1% of the purchase price of the home into the EMD,” says Kolodgie. “A low EMD gives a cash buyer an easy way out with little financial loss if something goes wrong in the transaction.”
Jackson says there’s a decent chance a cash buyer will still include an inspection contingency in the contract — especially if they are offering closer to market value. Pay attention to the number of days allotted for the cash buyer to complete their inspection. Harvell says that anything more than 14 days could be a red flag, as this could give wholesale cash buyers a way out if they can’t find another buyer.
Check to make sure the purchase contract contains no surprise contingencies. “For example, if you verbally agreed that the buyer would waive the home inspection, you’ll want to make sure there’s no inspection contingency, especially if your home is older or not in great shape,” says Martucci.
Step 6: Pass the inspection
In Shipwash’s experience, a contract will rarely fall through due to the inspection when selling to a seasoned investor. The inspection is mainly to protect the buyer against expensive issues like a cracked foundation, water or fire damage, mold, or other structural problems. And if the property needs repairs or renovations, the inspection period gives the buyer a chance to bring in contractors to provide quotes.
“This is why it is critical to go with a company that has a solid background in getting the deal closed,” he says. “These investors will discover the majority of expensive repairs upfront, and make their offer accordingly. Inexperienced investors make offers based on emotion, and many of their contracts fall through during the inspection period.”
Step 7: Clear the title
Once you’ve accepted an offer and entered into a purchase contract, the buyer will turn the contract over to the title or escrow company. The next step is to “clear title,” a process that shows the house is free of any liens, judgments, or bankruptcies that would prevent the transfer of ownership. The title company will complete a title search to make sure the home doesn’t have any outstanding claims. If you still owe money on a mortgage, the title company will also determine the payoff amount.
He estimates that these steps can be completed in 10 days or less, but it could take up to 10-15 business days.
Step 8: Close the deal and receive your cash
Once the title has been cleared, the title company will work with you and the buyer to schedule the closing. Since there’s no need to wait for the lender to process financing, the closing could happen anywhere from seven days to a month after signing the contract, and you’ll have more control over the timeline. This is when the buyer hands over the funds to you, you hand over the keys to them, and your cash sale is complete.
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