You just came into a house. You weren’t planning for it or even expecting it, but when a lawyer called to let you know your long lost uncle died, you suddenly found yourself the owner of a home on the other side of the country. Eager to cash in on your windfall but unwilling to travel and fix up a home in questionable condition, your first stop is Google.
You search “sell my house for cash” and are immediately inundated with results.
After exploring a few options, you fill out a form and receive a call within minutes. Once you explain your situation, the person on the phone assures you his company can take care of everything — valuing the home, cleaning, repairs, etc. — and will simply send you a check within the week.
As promised, a week after signing and faxing some documents, you receive a check for $65,000. Two weeks later on a whim you decide to check to see if the home is listed yet and find, to your horror, that the home is listed for $110,000.
You consult a real estate attorney and after she reviews the documents you signed, you learn there’s nothing you can do.
What went wrong?
When you sell your house for cash, you’re essentially bypassing the traditional listing process (which is typically the safest route to maximizing home value) in exchange for the convenience and certainty of a cash sale.
You can skip the hassles of staging and showing your home, and the stress of keeping it in perfect condition for months on end to accommodate choosy buyers.
A cash buyer also won’t need a mortgage to fund the deal. That means you can avoid an appraisal to appease the lender and that closing will be — all in all — a lot quicker. (The average home purchase loan took 49 days to close as of November 2020, yikes!)
But this is a big decision not to be taken lightly. Calling up the first cash buyer you come across is risky and if you’re not careful, investors will sense your desperation. Most importantly — not all cash buyers are alike.
Who buys houses for cash?
Cash buyers are a mixed bag. Some will purchase your home with the intention of renting it out. Others will renovate and flip it to turn a profit. High-tech players — called iBuyers — have cropped up in recent years. Unlike flippers, iBuyers purchase homes in fairly good condition at a high volume, turn them around quickly, and aim to offer a seamless home-selling experience online with easy-to-use digital platforms.
Depending on your home’s condition, price point, and location, your home will be a more desirable purchase to certain cash buyers over others. Most real estate buyers 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 all-cash.
Through our Simple Sale platform, HomeLight partners with hundreds of cash buyers across the country — from local real estate investors who purchase 1-2 properties per year, to institutional funds buying hundreds of homes each month. With a platform like this, you can request a cash offer on your home and we’ll actually introduce you to the highest bidder.
In addition, we’ll compare your cash offer side-by-side with an estimation of what you could likely fetch on the open market. With this information in hand, you’re less likely to sell for cash and then feel those pangs of regret. You’ll have made the decision knowing the full picture.
The risks of selling for cash on a whim
“I think the people I talk to who have been happy with [a cash sale] are people in distressed situations who have to get a quick sale and don’t really care,” said Jennifer King, an Ephrata, PA agent who earned HomeLight’s 2019 Top Negotiator Achievement.
If you’re thinking, “Perfect, where do I sign?” and are determined not to so much as lift a can of paint during this home sale, selling your home for cash may be your best match. Shop around and evaluate your options, and don’t count a traditional sale out just yet.
A quick review of “We Buy Houses for Cash” sites shows that real estate investors that offer to buy homes quickly for cash usually offer around 65% – 94% of a home’s value. Typically, a home’s price on our Simple Sale platform is going to be around 90%-95% of market value.
A great real estate agent, on the other hand, will conduct a comparative market analysis to price your house right at market value and sell fast. And HomeLight data shows the top 5% of agents can sell homes for up to 10% more than their peers.
Quick and easy can come at a price
One of the main reasons sellers go with a cash real estate service, beyond speed of sale, is if they have a dilapidated or messy home — something that might require work or cash before listing. Aggressive sales and marketing on the part of investors may push sellers into signing over their home quickly, turned off by the ticket price or work their home may need.
Services that offer to buy your house for cash bill themselves as a speedy, hassle-free alternative to a real estate agent. King asserts that services like this aren’t always necessary: “I’m taking that as my own initiative to get [sellers] set up with auctioneers, junk companies, whatever we need to do to get them up and ready on the market,” she says. “A good solid professional should have those resources and vendors.”
While this may cost a seller some cash up front, financing options are available for these fixes, and in the long run you will receive more on the sale of your house. What’s more, you’ll have the reassurance that you’re working with a professional.
Watch out for scams in the fast cash for houses space
People looking to unload real estate for quick cash naturally attract scammers. While many of these real estate investors operate perfectly legal and above-board services, others see opportunity in desperation. Beyond a steep cut in sales price, you stand to lose much more from opting for a quick cash sale from an un-vetted buyer.
One of the more common scams is a contract bait and switch. In this scam, a buyer may tell you they plan to simply write up a verbal agreement you reached and instead present a drastically altered written agreement. Among a subset of sellers looking to close quickly with little hassle, signing contracts without reading them carefully is more common and can lead to serious problems down the road. Sale price, ownership, and mortgage terms can all be altered in a way to leave a seller holding the bag.
But perhaps the worst scam sellers may run into is equity skimming. Desperate or disinterested sellers are particularly vulnerable to this scam, in which someone gains the title to your home, refinances it without your knowledge, takes the equity, and walks away. What makes this scam especially dangerous is that victims may have never set foot in a house, but are now on the hook for a home with no equity and potential foreclosure implications.
If you’re going to sell your house for cash, make sure you do your due diligence on the buyers. Ideally, get a trusted third party to verify the legitimacy of the offer.
You’ve got options if you want to sell your house for cash
Let’s try that opening scenario again:
This time, after you get off the phone with your uncle’s estate attorney, you call a qualified local real estate agent first instead of consulting Google. The agent offers to scout out the property, offering an appraisal and recommendations for your sale.
After a few days, the agent tells you the home needs significant cleanup and a few repairs, but not to worry, these can be handled on her end without requiring you to travel across the country. All told, your costs should total around $2,000. The agent again assures you this is a small price to pay because other homes in the area have sold recently for as much as $150,000.
Balking at the idea of spending $2,000 on a home you never wanted in the first place, you now decide to explore the option of selling the house now, for cash. Rather than go call an individual investor, you use the Simple Sale network to get a cash offer, if only for comparison’s sake.
The cash buyer we connect you with sees that your Uncle’s former home would make a great rental property, and is willing to offer 90 cents on the dollar. Now, you can make a decision as to whether taking a more modest price cut would be worth the speed and simplicity of a cash deal to you. You even use a handy Home Value Estimator and Net Proceeds Calculator to work out the final math and see how the take-home pay compares with each option.
At the very least, bringing in a real estate professional, or working through a network of cash buyers rather than going directly to the first company you find, costs you nothing and could bring you thousands of dollars on your sale. “I’d always check to see how much money you’re leaving on the table first to see if it’s worth it,” says Jenah Mahan, a top-selling agent in Tacoma, Washington.
Bottom line: Do your homework, and know your options!
Header Image Source: (Vincent Noel / Shutterstock)