“A lot of sellers think selling a house ‘for cash’ means the buyer is going to show up with a briefcase full of money for them, but that’s not the case,” says Lucas Machado, a real estate investor and owner of House Heroes, LLC. “A ‘cash offer’ simply means the offer does not include a financing contingency — in other words, it’s not dependent on the buyer being able to secure a loan.”
But that doesn’t make the process of selling your house for cash any less mysterious. We’re here to walk you through it step by step so you can make an informed decision about whether it’s right for you. We’ll cover all of the basics, including:
- Where to find trusted cash buyers
- How to get a cash offer and what to do when it comes in
- Differentiators and similarities to a conventional listing experience
- How the experience can vary among cash buyers
- What to expect from escrow and closing
- Signing the final paperwork and cashing out
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Selling a house for cash: How does it work?
Cash buyers share a few common traits: they don’t need lender financing to pay for your house, and typically they will buy your house off-market. That means that you’ll get an offer with far fewer contingencies (you won’t need an appraisal to appease the bank, nor will the buyer need to sell their existing house before they can get a loan, for example). The absence of a loan reduces a lot of the unknown on your end as a seller, and — the good news is — you can skip the stagings and showings rigamarole.
Cash buyers will differ as far as their intent behind the purchase, the types of homes they’re interested in, and the overall experience they offer to sellers.
- “Buy and hold” investors intend to hold onto the property for an extended period of time, usually with the intention of renting it out.
- House flippers typically buy at a steeper discount and plan to make improvements to a property before selling it for a profit.
- iBuyers (“instant buyers”) make immediate offers on homes online. iBuyers use automated valuation models (AVMs) and web platforms to provide a streamlined experience for sellers.
Depending on the type of investor you end up selling to, the process of getting an offer and closing will vary, but you can expect to go through these main steps:
Find a cash buyer
Below are some of the most common and effective ways to find a qualified cash buyer:
- Simple Sale:
HomeLight’s free Simple Sale tool will match you with a pre-vetted buyer who we’ve confirmed is purchasing homes in your area — and who is the best match for your property based on their past transaction history. It takes only two minutes to find your best match, and there’s no obligation to accept the offer.
- Online search:
“Cash buyers are typically investors, and most markets will have at least a handful of them with an internet presence,” says Machado. This will require that you do a bit more legwork, though.
- Work with a wholesaler:
Another option is to work directly with a wholesaler, says Travis Steinemann, a real estate investor and founder of BuyHousesBR.com. “Wholesalers match cash buyers with sellers, and they typically only take a small cut,” he explains. “They value your property, estimate the rehab costs, and market it to their buyers’ lists. You can find them by Googling ‘we buy houses’ followed by your city name.”
Whatever method you use to find cash buyers, be sure to research any prospects and ask for references from other sellers.
Get a cash offer and review it
Once an investor or iBuyer has presented you with a cash offer, how do you know it’s a fair number? Evaluating a cash offer can be tricky, and there is no one-size-fits-all formula.
However, Steinemann says, if your house is in great shape, you can look at comparable properties that have sold recently in your area with a similar size and level of finish, and then subtract the agent’s commission and throw in whatever discount you feel the benefits are worth.
“That will depend on your situation — someone who is going through a foreclosure or who has a vacant house would value cash a lot more than someone who just wants a bigger house,” Steinemann pointed out.
On the other hand, if the house isn’t in great shape, he suggests taking the approximate value of the updated houses in your area, subtract what it would cost to get your house to that condition, deduct the commission, subtract the investor profit (usually 15%), and that will arrive at a fair price.
Qui recommends asking the following questions when evaluating a cash offer from an investor:
- Does the buyer plan on depositing a significant amount of earnest money?
- Does the buyer have a good track record of closing transactions?
- Is the buyer using a standard contract? If not, is it OK with them if you have an attorney review the terms of the contract?
According to Steven Herzberg, a real estate attorney in Miami who works on residential and commercial transactions, there’s more to a cash offer than just the sale price.
“Any serious cash offer buyer should be willing to put down a decent initial deposit,” he says. “For example, for a $400,000 house, the deposit shouldn’t be $1,000.00 — it should be closer to 3%-5% of the purchase price.”
Herzberg also suggests asking for proof of funds, which might be a simple bank statement or a letter signed by a bank officer, to confirm that the buyer has the available funds to complete the purchase.
If you need help determining what your property is worth, you can start with our free Home Value Estimator, which draws from multiple sources to create a real-time home value estimate based on current market trends.
“Although appraisals vary quite a bit and aren’t an absolute guarantee, it could help if you’re really struggling to pinpoint what would be a good price,” she says. “At the end of the day, if you’re going to get less than market value, you have to decide whether the benefits outweigh that loss.”
Prepare and sign the purchase contract
After accepting a cash offer, Mike Qiu, a “fix and flip” investor in the greater Seattle area and owner of Good As Sold Home Buyers, says the rest of the transaction is very similar to a typical home sale. The contract, which is usually prepared by the buyer, should include the purchase price, the amount of the deposit, and the closing date. The seller can choose to sign and accept or have an attorney review the terms.
Some cash buyers will waive the home inspection, while others will still opt to get one, and may negotiate the contract price to cover any required repairs.
In some cases, Steinemann points out, a cash buyer might make a “sight unseen” offer without doing an inspection. “They would do this if they know their price is so good that anything wrong with the home is not an issue, or if they are planning on tearing down the home and the land value is all that matters to them,” he explains. Those types of offers usually close very fast, in around 7 to 10 days.
Because the cash buyer won’t be working with a lender, you’ll likely shave time off the window during which the house would otherwise need to be professionally appraised in a conventional sale, as well as the time it would take for the buyer’s loan to go through.
Identify any unique requirements
As Machado points out, while most cash sales are quick and straightforward, there are sometimes extenuating circumstances that can lengthen the process a bit.
“For example, if the house is in a homeowners association, the HOA may require 30 days to process the buyer’s application,” he says. Another aspect of a real estate closing is the municipal lien search. In some municipalities, he notes, a lien search only takes a few days, while in others, it can take up to three or four weeks.
Despite any possible delays, “a cash sale will always be faster than a conventionally financed transaction in the same situation in the same municipality,” says Machado.
Close on the sale
Again, a closing on a cash sale will generally go much faster than a deal that involves lender financing.
“Usually, sellers for cash sales are okay with a two-week close,” says Qiu. That’s much quicker than a closing for a conventional sale — according to Ellie Mae, the average time to close a purchase loan is 45 days.
In addition to speed, a flexible schedule is another benefit of a cash closing. For example, if the seller needs to close before moving to their next home, an investor or flipper will be more likely to delay possession after closing than a traditional retail buyer would.
When it comes to the actual closing, you probably won’t notice much difference from a traditional sale, other than the fact that it will be quicker. It will likely be held at a title company, and you’ll sign the same documents as you would in a traditional sale, such as the deed, settlement statement and any property disclosures — minus the mortgage and financing documents.
“The paperwork can be drafted either by the title company or the seller’s preferred attorney–it’s up to the seller,” says Machado.
Benefits to selling a home for cash
You’re likely considering the possibility of a cash sale for any number of reasons:
- You’ve found your dream home and want to purchase it quickly without waiting on your current house to sell on the open market.
- Your house needs extensive repairs or upgrades that you can’t or don’t want to subsidize.
- You need to sell fast to accommodate a relocation or other change in circumstances.
- You don’t have the time, energy or patience to get your house ready, accommodate showings and then wait on the appraisal, inspection, financing, and closing processes.
We spoke with some experienced investors and real estate agents to identify some of the most appealing aspects of working with a direct buyer, as well as some of the drawbacks.
Fast and guaranteed closing
Across the board, the main draw of a cash sale is speed. “Cash buyers can close in as little as a week, where traditional financing can take a month or more,” says Steinemann.
With a financed purchase, there’s always the chance that the deal could fall through if the buyer doesn’t get approval for the loan or if the appraisal comes in lower than the contract price — a long and frustrating process that puts you right back where you started. With a cash sale, it’s usually not a matter of if you’ll close, but when.
When working with a cash buyer, many of the common headaches and uncertainties of the traditional selling process — such as staging, showings, and appraisals — are off the table, which means a simpler, more straightforward process.
Although the contract amount of an investor sale will likely be lower than what you could get in a traditional sale, you could save on some ancillary costs.
“In a retail market sale, most of the transactional costs, such as agent commissions for both listing and buyer’s agents and closing costs for escrow, fall on the seller,” noted Johell Aponte, founder and acquisitions manager with Move On House Buyers.
“Plus, the seller is often asked to support buyers with closing cost concessions, pre-listing repairs and updates, post-inspection repairs, and possible extended hold times, all of which can add up to substantial costs.”
Quicker path to your next home
Let’s say you’ve found the perfect home that checks off all the items on your list and is within your price range, but it’s getting a lot of interest and multiple offers. As Nebraska real estate agent McCoy points out, by taking a cash sale on your current house, you’ll be in a better position to secure your next home, because that seller won’t have to wait around on any contingencies or financing delays.
“By getting a quick cash sale and closing, you could have a better bargaining chip for the house you want,” she says.
Looser standards for the state of the property
As Steinemann points out, most government programs that buy FHA, HUD, and VA loans have strict guidelines that can make fixer-uppers more difficult to sell. “When working with a cash buyer, the property doesn’t necessarily have to be in good shape — it can be sold in any condition,” he says.
Potential drawbacks of a cash sale
If all of this sounds too good to be true so far, there is a flip side of the cash offer. It’s up to you to determine whether the benefits are worth these possible downsides:
When selling for cash, all of that speed and convenience comes at a cost: You’ll generally sacrifice a chunk of the equity in your home, as cash buyers are typically looking to pay below market value.
“It depends on the market hold times and costs, but sellers may expect to leave on the table anywhere between 8% to 15% of what they would have projected to get from a successful retail sales process,” says Aponte.
At the end of the day, investors are running a business — a low-margin one, at that — and they need to make money to keep buying homes.
“Investors expect to get a better deal because they are a sure thing and can close quickly,” explains Steinemann. “They usually know their numbers and won’t buy emotionally, unlike most first-time homebuyers. Either the numbers work or they don’t.”
There’s a chance you could recoup some of the loss in home price, notes Aponte. “Depending on the condition of the home and the amount of repairs and updates it might require to list at market value, sometimes the seller is able to come ahead with a cash sale — not only in reduced stress, but also financially, especially for homes that are in older neighborhoods and have appreciated greatly.”
Potential for fraud
The unfortunate reality is that there are always scammers lurking, ready to prey on homeowners who need a quick sale. Before entering into any contract, thoroughly research the company or person and ask for references of past sellers. Be wary of any buyers who show no interest in seeing your home in person and who only correspond via email, as those could be red flags of a scam.
One of the benefits of going through Simple Sale is that all of our cash buyers have been pre-approved and vetted before gaining access to our platform.
Possibility of “bait and switch”
Kevin Kendrick, a top Orlando agent who sells homes 45% faster than average and is also a certified iBuyer, sometimes sees reasonable cash offers come in for his sellers, which can be exciting at first — but that offer isn’t set in stone until the contract is finalized.
“A cash buyer might make an offer that’s close to list price, but then they often ask for pricey repairs at the inspection stage,” he explains. “When all is said and done, the final price might be up to 15% below fair market value.”
Lack of commitment
Qiu warns against cash buyers who make offers with only a very low earnest money deposit. Average deposits will vary by location, but he says that anything less than $2,000 in general and less than $5,000 in higher-priced markets warrants caution. An extended inspection period is another red flag.
“These are signs that the homeowner is dealing with a wholesaler that intends to sell the contract to a third party instead of buying themselves, and can easily walk away from the transaction if it doesn’t work out,” says Qiu.
Ready to cash out?
Every seller’s situation is unique, but for many, the perks of a cash sale can be well worth the sacrificed equity. If the process of selling a house for cash sounds like something you’d like to explore, our Simple Sale tool is a solid place to start. Rather than go out and find a cash offer on your own, HomeLight will hand-match you with a direct buyer who purchases properties like yours — in terms of condition and price point — and who has been verified as ready to buy right now.
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