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Wait! Read This Before You Sell Your House for Cash

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As a rising number of companies provide cash offers for homes and improve experiences for sellers with advanced technology, the idea that you don’t have to wait months to list and close on your house appeals to many stressed-out sellers. If speed and convenience are on your moving list, you may be wondering if you should sell your house for cash.

Perhaps you’ve landed your dream job, but it’s across the country and you’re starting in just two weeks. Or maybe you’ve inherited a house and don’t have time to fit settling the estate into your already hectic schedule.

Selling your house for cash could be the solution when life throws you a curveball that requires a swift sale.

And with interest rates steadily climbing, a buyer with cash on hand eliminates the uncertainty of getting a loan approved. At nearly 7%, rates have more than doubled since last year, making it challenging for prospective buyers to qualify for a mortgage.

“A cash buyer is not susceptible to rate hikes,” says Will Holly, owner of Holly Nance Group, a boutique real estate investment firm in New Jersey. An increase in interest rates or a change in the buyer’s credit history or employment situation could kill a deal just days before closing. “Contracts are falling out more often,” Holly comments about the current real estate market.

Without the added risk of a financing contingency, selling to a cash buyer is typically a simple process.

“You make a phone call or answer some questions online, agree to an offer, and then it’s not something you have to worry about anymore,” says Doug Van Soest, owner of SoCal Home Buyers, a house flipping company in Southern California. “Plus, you’ll save money on things like commissions, repairs, and closing costs.”

“It turns into an easy transaction where the seller doesn’t have to be stressed out. It just takes all that pressure off the seller,” remarks Mark Abdel, a top-performing agent in Minneapolis whose specialties include investment properties.

If it all sounds too good to be true or you’re unclear about what selling a house for cash is really like, we’ll walk you through the most common questions and points of confusion.

Sell Your House for Cash: Request an Offer Today

HomeLight provides you with a convenient, no-obligation all-cash offer to buy your home, on your timeline. No repairs, no staging, no showings — and close in as little as 10 days.

What does it mean to sell your house for cash?

Selling your house for cash has similar benefits to trading in your old vehicle to the dealership when you buy a new car. Sure, you might pocket a little more money if you sold it yourself. But it would likely take longer — and require extra work on your end. You’d have to make minor repairs, advertise it on Craigslist, organize test drives for potential buyers, and handle all the paperwork yourself.

Translating that to real estate terms, selling a house for cash goes something like this:

1. Request an offer

You skip the staging and showing process and go straight to requesting an offer. At this point, you can communicate whether you’re selling “as is” — meaning you intend to sell the house in its current condition without making repairs — or if you’re open to resolving any inspection issues.

2. House is evaluated

The buyer will collect some information about the home, possibly send a representative to do an onsite visit, and determine what they’re willing to pay.

3. Review the contract

You’ll have the opportunity to review the offer, including the contract price and terms, and decide whether to accept.

4. Ask for proof of funds

You should always obtain documentation that a person or company is who they say they are and actually has the funds and abilities to complete a transaction of this size.

5. Complete inspections

If the deal moves forward, the cash buyer may still perform steps like the inspection and appraisal — it all depends on whom you work with and how they operate. Even if you’re selling “as is,” a home inspection could still be required.

6. Fast-forward to closing

Without a bank’s involvement, there will be no lender-ordered appraisal or loan processing period. As of October 2022, the average time to close a purchase loan for a home was 51 days, according to Ice Mortgage Technology. In contrast, a cash buyer has the ability to close in as few as 10 days to two weeks.

7. Clear title

The cash buyer will require a title search to make sure that you can convey the property free and clear of any claims or judgments against the home, such as mechanic’s liens, unpaid taxes, or boundary encroachments.

8. You get paid!

It may only take a matter of weeks or even days for the cash buyer to wire funds over to your bank account.

In summary, selling for cash won’t mean that a person shows up on your doorstep with a briefcase full of hundred-dollar bills. You’ll still have official steps to complete and possible hiccups to overcome like a title defect. But when your buyer doesn’t have to wait for the lender to underwrite or process their loan, you can usually coordinate a much faster sale. You can also breathe easier if interest rates go up knowing that your buyer won’t back out because the loan didn’t get approved or the monthly payments increased.

Are cash-for-home companies legit?

In short, the answer is yes; there are many legitimate companies out there that purchase homes for cash, will provide you with a great experience, and are good on their word. However, we always recommend that you do your due diligence on any buyer before you provide sensitive information or sign a contract.

“Check that the house-buying company has a good track record of homes purchased,” advises Holly. He suggests looking at properties that the firm bought and sold in your neighborhood and examining public records to review its transaction history. In addition, request references of other home sellers who have sold to the investor or house-buying company, and give them a call to ask about their experiences.

Abdel cautions sellers to be wary of scams in which house-buying companies promise a certain price, but then hit you with hidden fees that substantially slash your profit.

Check their BBB rating

No matter what type of house-buying company you decide to work with, make sure it’s an accredited Better Business Bureau (BBB) member. Check for positive reviews and timely responses to complaints.

HomeLight, which provides cash offers through our Simple Sale platform, is A-rated and BBB accredited.

Ask for proof of funds and adequate earnest money

“Ask for proof of funds such as a bank letter to make sure they have the money in their account,” Holly advises.

An official proof of funds (POF) from the buyer’s bank verifies that they have adequate liquid assets to cover the purchase price and closing costs, as well as provide sufficient earnest money, the deposit that represents a buyer’s commitment to a sale. Abdel recommends asking for 10% of the purchase price as earnest money.

There are a lot of investors that are reaching out directly to homeowners to try and buy their property with cash. To make sure a buyer is legitimate, or that they’re making a good offer based on the value of your home, you can always speak to an experienced local real estate agent and get their opinion.
  • Brian Breeckner
    Brian Breeckner Real Estate Agent
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    Brian Breeckner
    Brian Breeckner Real Estate Agent at Beckett Realty Group
    • Years of Experience 18
    • Transactions 590
    • Average Price Point $145k
    • Single Family Homes 550

Consult an agent where needed

An established real estate agent will likely have the inside track on who’s who in the local cash buyer market and can also help you avoid getting lowballed.

“A lot of agents that are experienced and have been in the business have a Rolodex of people that they can go to that they’ve worked with over time that are investors,” Abdel comments about how top agents can help find cash buyers by pitching properties to their networks.

“There are a lot of investors that are reaching out directly to homeowners to try and buy their property with cash,” notes Brian Breeckner, a top-selling real estate agent based in Columbus, Ohio who has helped investors build their portfolios. “To make sure a buyer is legitimate, or that they’re making a good offer based on the value of your home, you can always speak to an experienced local real estate agent and get their opinion.”

HomeLight’s Agent Match platform can connect you to top-performing agents in your area who sell homes faster and for more money. Our free tool analyzes over 27 million transactions and thousands of reviews to determine which agent will best meet your needs. Whether you’re looking for a quick cash sale or to expand your buyer pool by putting your home on the market, you’ll receive your agent matches in just two minutes.

What about ‘We Buy Houses’?

You’ve probably seen ads for companies proclaiming  “We Buy Houses for Cash” — so are they legit?

HomeVestors of America, the largest professional house-buying franchise in the country, operates under the name “We Buy Ugly Houses®.” If you connect with any one of its more than 1,150 franchises in 47 states and 176 markets nationwide, the answer is yes. The company, which specializes in flipping dilapidated homes, is well-established in the cash house-buying space having purchased over 125,000 houses.

For more details on this particular business known for its shaggy-haired caveman and yellow billboards, we’ve put together an entire guide on the history of We Buy Ugly Houses®.

It’s easy to confuse We Buy Ugly Houses® with other companies that have similar names touting their cash house-buying capabilities such as We Buy Houses ​​(WeBuyHouses.com), another legit house-buying group. Helping homeowners quickly sell homes in any condition for cash, this business serves over 200 markets in more than 30 states. However, the company does not have franchise locations but instead provides professional real estate investors with a license to its marketing and branding programs.

Keep in mind that “We Buy Houses” is no longer a trademarked term; so not every company you see using “We Buy Houses” in their name or marketing is going to be associated with the WeBuyHouses.com brand we’re describing here. Make sure you’re aware of whom you’re working with and don’t assume “We Buy Houses” to be the only indicator of a company’s legitimacy.

Just like you would with any other cash buyer, do some digging before working with an investor operating under the We Buy Houses brand or who has a comparable slogan offering cash for your property.

Who will purchase your home for cash?

As a group, cash buyers or house-buying companies are individuals or entities that buy your house outright and usually in as-is condition, without the need for lender financing. In general, selling your home to a cash buyer allows you to skip the home prep, showings, and staging hassles and arrange a more flexible closing timeline to coordinate with the purchase of your next residence. But not all cash buyers have the same exact business model. To keep it simple, we’ve grouped these buyers into a few broader categories you’re likely to encounter.

Online house-selling platforms such as Simple Sale

With Simple Sale, HomeLight provides you with a no-obligation all-cash offer to buy your home, on your timeline. To get started, tell us a few details about your home and when you need to sell. After collecting some information, we’ll provide you with a no-obligation, full cash offer, and you can close in as little as 10 days.

iBuyers

An iBuyer or instant buyer is a specific type of house-buying company that first emerged in the mid-2010s. iBuyers use automated valuation models (AVMs) to make competitive offers on homes that are typically in better condition. Examples include Opendoor and Offerpad.

While iBuyers generally pay more for homes than flippers or buy-and-hold investors, they charge a service fee of around 5%. Since they tend to make less profit per flip, iBuyers rely more on turning over a high volume of homes using technology to streamline operations.

Buy-and-hold investors

Buy-and-hold investors purchase homes and convert them into rental properties. These buyers may sell a property once it appreciates enough or hold on to it indefinitely.

This category includes individual investors who buy and rent out properties for passive income. On a larger scale, institutional investors purchase a minimum of 10 rental properties per year, the quintessential example being Invitation Homes which operates in 16 markets across America. According to a recent study by ATTOM Data Solutions, institutional investors were responsible for 6.7% of all single-family home purchases in Q3 2022, down from 8.4% a year ago.

When you sell to a buy-and-hold investor, you have more flexible closing dates and will likely get a better price than if you were to sell to a house flipper.

House flippers

Perhaps media darlings Chip and Joanna Gaines or your remodeling-enthusiast uncle come to mind when you see the phrase “house flippers.” Whether a small mom-and-pop operation or a larger business, flippers buy homes — often in poorer condition and at a lower price — with the intention of renovating them and reselling them for more.

“Everything has to look brand new,” says Holly, who flips half of the properties he purchases. Sometimes this involves gutting the entire house while other times it’s just a cosmetic makeover. Turnaround time is typically about four months from the time he buys a home, makes renovations, and then sells it.

“The minimum return on investment varies depending on things like the market and the condition of the home, but typically we need at least a 10% return on a purchase to make it worth the risk,” says Van Soest.

Home flippers remain a strong force in the cash house-buying marketplace. ATTOM Data Solutions reports that in the second quarter of 2022, 115,198 single-family houses and condos were flipped, representing 8.2% of all home sales, an increase from 5.3% in Q2 2021 and the third-highest level since 2000.

Why would someone sell their house for cash?

“The value a cash buyer offers is convenience and speed,” says Holly, citing the major reasons to sell your house for cash, along with peace of mind and financial considerations. “Any home seller with any complexity to the sale is better off with a cash buyer,” he adds, particularly with estate sales and foreclosures. Holly’s firm has an estate specialist and relationships with foreclosure and estate attorneys to guide sellers through the probate process and handle complicated matters.

Abdel has worked with clients whose homes were in disrepair and needed lots of work. “It was an advantage for them to take a cash offer because on the open market they would have gotten lower offers from regular buyers or they might not qualify for financing just due to the condition of the property,” he explains.

A divorce, job move, or low bank account can all be strong motivators to go for the speed and convenience of a cash sale from a house-buying company. However, if you take the traditional route and list your home on the market where sales are cooling down, leading agents recommend getting back to basics such as routine maintenance, decluttering, deep cleaning, staging, and sprucing up curb appeal.

On the other hand, if speed, convenience, peace of mind, and overcoming financial challenges are on your list of reasons to sell to a cash buyer, here’s how each one of these motivations could apply to your situation.

Certainty

  • You’re moving for a job and have to be there by a certain date.
  • You’d rather not deal with the risk of a low appraisal.
  • You don’t have the time to hire contractors and make major repairs.
  • You’re nervous about accepting an offer with tons of contingencies.
  • You’re stressed that rising interest rates could keep buyers from getting a loan approved.

Speed and convenience

  • You inherited a house you’re unfamiliar with and perhaps far away from.
  • You don’t want to disrupt your life with house prep, staging, and showings.
  • You have a problematic or occupied rental property.

Finances

  • You need cash for a down payment on your dream home.
  • You don’t have the funds to make necessary repairs.
  • You’re on the brink of foreclosure.
  • You need cash to get out of debt.

Difficult circumstances

  • Your life has been turned upside down by divorce or an unexpected death in the family.
  • Liens and judgments could impede the title search.
  • Your house suffered damage in a storm or fire.
  • The tax collector is knocking on your door because you owe back taxes.
  • Your home has building code violations or unlawful conversions.

Take Northern California couple Sam and Cathy,* who were preparing to retire. Plan A, they told HomeLight in an interview, was to fix up their condo and list it on the open market. But after struggling to find contractors to make repairs and updates, they decided to sell to a cash buyer instead and eliminate the legwork. They were pleased with the cash offer that allowed them to skip repairs and showings, and closed the sale in just 20 days.

What value does a cash buyer provide?

“You’ll avoid the time hurdle involved with back-and-forth negotiations with multiple buyers,” Holly points out one significant advantage of selling your house for cash.

Consider these other important benefits of selling to a buyer who pays cash for your home.

Faster closing

If your buyer has to borrow money, they — and you — are on the lender’s timeline, which is often at least six weeks and includes a home appraisal. All-cash purchases close quickly because lenders aren’t part of the picture. Appraisal issues delayed settlement for 8% of real estate contracts, according to a September 2022 survey by the National Association of Realtors®. What’s more, a cash buyer’s offer won’t hinge on your home appraising at a certain amount.

Flexible move-out

Whether you want to move next week or stay put for a couple of months, a cash sale generally gives you plenty of wiggle room. Again, this goes back to the steps you can skip in a cash deal such as not waiting on a third party to approve a loan or conduct an appraisal.

Lower-maintenance sale

When you request a cash offer, you won’t need to worry about keeping your home spotless for weeks or disrupting your schedule for a slew of showings. In addition, you can choose to sell your house “as is” and skip pre-listing projects like roof repairs, painting, and landscaping. How much work you want to put in is really up to you with a cash sale, whereas traditional buyers will have higher expectations about how your home should look.

Reduced expenses

A cash offer can cut out many of the usual home-selling expenses including repairs, curb appeal projects, staging, and commissions, acting as a counterbalance to any discount you may receive on price. Our analysis shows that sellers seeking a traditional buyer spend $31,308 on average.

“You’ll also save on holding costs,” Holly remarks about additional savings when you sell to a cash buyer. In today’s sluggish real estate market, he says it could take as long as six months to sell a house in New Jersey. You’d have to wait up to half a year to get the equity out of your home while continuing to pay for utilities and real estate taxes before getting on with your life and moving to your new home. Plus, the longer your home sits on the market, the greater the likelihood of reducing the list price.

What are the downsides of selling for cash?

If what you’ve read so far has sold you on the idea of selling for cash, great! But it’s important to also understand the drawbacks before rushing into a cash sale with a house-buying company.

Lower price

The trade-off for a faster, low-hassle sale is often getting less money for your home. How much less depends on many factors, including the type of buyer you’re selling to, your location, the condition of your property, and housing market conditions. Even with a competitive offer from a reputable iBuyer, their fees can still cut into your profit. Depending on your situation, the trade-off may be the solution you need.

To get a preliminary estimate of how much your home might be worth today, check out HomeLight’s Home Value Estimator. Answer a few questions and we’ll use local housing market data to give you a ballpark home value estimate in just a couple of minutes.

Not totally off the hook for repairs

One of the biggest lures of selling to a cash buyer is that handling pesky repairs lands on their plate, not yours. While you typically won’t have to pay for repairs out of pocket, you may have to settle for a lower price on your home. In most cases, a house-buying company calculates how much it will need to spend on repairs and deducts that cost from its offer.

Harder to negotiate

According to a recent HomeLight survey of top agents, over 89% of agents report that bidding wars have declined in their markets. With rising interest rates and increasing inventory, 90% of agents say that price reductions are more common. Most agents expect home prices to either remain flat or fall over the next six months.

In the current real estate market, multiple bids that could escalate your property’s value are no longer the norm, and price reductions are more prevalent. But you could leverage a better price as traditional buyers envision themselves living in your home. With cash buyers, there are generally no heartstrings to tug on — it’s strictly business.

How much do cash buyers pay?

Various house-buying companies and investors will offer different amounts for a home.

Depending on the condition, price point, and location, your house will be a more desirable purchase to certain cash buyers over others. Most real estate investors have a specific “buy box” they use with parameters as to which types of properties are most valuable to them. That means what your home is “worth” will vary, even among buyers who can pay instantly.

Flippers, for example, often use the 70% rule. According to this guideline, a flipper won’t pay more than 70% of the “after repair value” (ARV) of a home which accounts for deductions to make repairs and renovations.

Unlike ‘we buy houses’ flippers, iBuyers tend to pay closer to market value because they target newer homes in good condition. But they charge a service fee, about 5% of the sale price. In addition, you’ll likely have to pay closing costs of between 1% and 2% for escrow fees, title fees, and transfer taxes. After you accept the iBuyer’s offer, the company then inspects the home and subtracts the estimated cost of repairs from the final price.

Buy-and-hold investors fall somewhere in between flippers and iBuyers. They typically pay more than flippers, but less than iBuyers and aim to make between 8 to 12 % on their investment.

“The discounted price someone should expect for a cash sale varies significantly,” says Van Soest. “The cleaner the house, the better the neighborhood, and the fewer issues a house has, the more likely you’ll get an offer that’s closer to market value. The more problems the buyer has to deal with, the lower the offer will be.”

How long does it take for a cash buyer to close?

Getting over that final hurdle to close a traditional sale — making sure a buyer’s financing is in order — can be an ordeal. With the average time to close a purchase loan exceeding 50 days in today’s market, that’s almost two months of waiting.

Cash buyers, on the other hand, are a lot more agile. Typically, a company that buys homes for cash will show you proof of funds for the amount they’re willing to offer and can close in as little as a week to 10 days.

Is selling for cash a smart move?

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

Abdel sums it up this way: “It’s an almost guaranteed sale where you go with the cash buyer and you don’t have any contingencies.” Without the risk of financing glitches delaying the sale or inspection issues prompting the buyer to renegotiate, selling your house to a cash buyer will get you to the closing table much faster and with fewer headaches. But unless you sell to a cash buyer who plans on living in the home, Abdel says you could be giving a discount of 10% to 15%.

Still on the fence? HomeLight’s Simple Sale platform offers a commitment-free way to test the waters. Just enter a few details about your home online and we’ll provide you with a cash offer in as few as 72 hours. From there, you can decide whether you want to move forward. In as little as 10 days your house can be sold — and you can be moving on with your life.

One thing is certain: Companies that buy homes for cash aren’t going anywhere. And they are becoming more popular with a variety of sellers, not just those in distress.

“In my opinion, iBuyers and other cash-buying companies will continue to become more mainstream,” says Van Soest. “Technology is making it easier and easier to sell a home virtually.” And, he adds, you may get a better price than you would expect if your house is in really good condition and in a desirable area.

*Sam and Cathy are pseudo names; these sources asked to be anonymous for privacy reasons.

Writer Dorothy O’Donnell contributed to this story.

Header Image Source: (Will Porada/ Unsplash)