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Sellers’ Guide to Texas All Cash Home Buyers

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Need to sell your house fast in the Lone Star state? Perhaps you’re leaving the city of Dallas for a relaxing retirement in Galveston Island or plan to relocate to scenic California. As you eye the next destination, Texas all-cash home buyers may view your current property as a safe investment in light of the state’s growing popularity.

The Census Bureau estimates that between July 2020 and July 2021, Texas added 382,436, claiming a bigger population increase than any other state. In response to growing interest in the state’s mild weather, gorgeous beaches, and lack of state income tax, Texas home values have increased 68% in only five years, from a median price of $163,000 in 2017 to $274,300 in 2021, according to data from Texas Realtors®.

However, recent market cooling, thanks to higher interest rates, has begun to lower median home sale prices in the state as of Summer 2022, according to the Texas Real Estate Research Center.

For these reasons and more, buyers with deep pockets see Texas as an attractive investment — particularly the suburban rings around houses for sale in Austin, Dallas, and Houston. In addition, the state ranks sixth on the list of states with the lowest percentage of owner-occupied homes, meaning many landlords are looking for their next Texas rental. Read on to find out more about all-cash home buyers in Texas and how they can facilitate a fast sale.

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Inside the Texas all cash home buyer market

Despite the market correction, all-cash deals accounted for 24% of home sales across the country as of July 2022, according to the National Association of Realtors. According to HomeLight’s Fall 2022 Top Agent Insights report, 42% of agents report that cash offers are remaining steady in their local markets, though 38% report a decline in their area.

Nick Koren, director at New Western, a national real estate investment company that buys properties in Austin, San Antonio, Dallas, Fort Worth, and Houston, echoes that the cash-buying market has changed dramatically in the Lone Star State over the past couple of years as traditional buyers pony up cash to compete. “In the past, cash buyers would typically be real estate investors or national home-buying companies,” he says. “Owner-occupants have also found sources of financing that provide cash to purchase a home.”

The state remains a hot spot for real estate investors, whether they’re looking for a property that will appreciate or generate solid cash flow. A forum on investor network Bigger Pockets speaks to many markets in Texas showcasing strong “underlying fundamentals,” including growth in jobs and income, lifestyle offerings, and a talented workforce, which translates as steady home price appreciation and rent increases.

Indeed, Texas represents the second largest U.S. economy (behind only California) with $1.9 trillion in output. The state does have a higher property tax rate of 1.83%, but this drawback is somewhat offset by the state’s landlord-friendly rules and regulations, according to real estate investment company Roofstock. As one investor put it: “Everyone wants to get a piece of Texas.”

How long does it take to sell to a cash buyer in Texas?

Koren says that without any financing contingencies, the timeline for a cash sale in Texas can be as fast or as slow as the person selling the home wants it to be. When his company buys a home for cash, they can typically close in as few as 7 days.

Hayden Lyon, owner of Cowtown Home Buyers in Fort Worth, Texas, echoes Koren’s estimated timeline for cash sales. “From the time the contract is executed, cash transactions can close in as little as 5 to 7 days, depending on how quickly the title company can draw up the documents and get everything ready for closing,” he says. “The closing timeline is entirely dependent on how quickly the seller wants to sell.”

The process of selling a house for cash in Texas

When Koren purchases a house for cash, the process generally follows these steps:

  1. A licensed agent will assess the home as they walk through the property.
  2. Based on the property analysis, Koren, as the buyer, offers the seller a firm cash offer that won’t be reduced later by scheduled inspections or an appraisal.
  3. Then, the seller must fill out a seller’s disclosure if they’ve occupied the property.
  4. Koren strives to purchase a property in as little as 7 days, allowing the seller to choose the closing date.

Koren says that cash sales in Texas can really be that simple, as long as the title is free and clear. The biggest issues come up, he says, when properties are inherited without a will in place or have not been correctly probated.

Lyon adds that the state of Texas has standard forms and contracts issued by the Texas Real Estate Commission that dictate what must be completed prior to the sale. These contracts will include language that indicates which disclosures, amendments, and addenda are required, as well as how property taxes will be handled as part of the transaction.

Common types of all-cash buyers in Texas

Most cash buyers in Texas tend to fall into the following categories:

  • Wholesalers: This type of buyer will present a cash offer to a seller, often at a significant discount. After executing the contract, the wholesaler will turn around and “assign” or “sell” the original contract to another investor cash buyer for a fee, Lyon explains. “The best way to describe a wholesaler is as a middleman between the seller and the buyer,” he says. Some of the top wholesalers in Texas include New Western Acquisitions, Networth Realty, and HomeVestors.
  • House flippers: Flippers will present cash offers to sellers, typically at a discount. This type of buyer typically focuses on distressed properties where there is value to add through renovations, Lyon explains. “There is no middleman and closing can occur anytime the seller is ready,” he says. House flippers can be individual “mom-and-pop” investors, but there are also some larger house flipping companies in Texas, including Flip Your House and Connected Investors.
  • Buy-and-hold investors: These types of investors look to purchase properties — often distressed — and keep them as rentals to generate monthly cash flow. Although they may be cash buyers, they’re not always looking for a discount, Lyon explains. Instead, they’re trying to use a cash offer as their competitive advantage. “This does not change the seller experience or the closing timeline,” says Lyon. “The closing is the same as working with a flipper, and can happen anytime the seller is ready.”
  • iBuyers: Short for “instant buyers,” iBuyers are online platforms that use Automated Valuation Models (AVMs) to calculate the value of a home and then generate an instant offer. Some examples of iBuyers who make cash offers for homes in Texas include HomeLight Simple Sale, Opendoor, Offerpad, Knock, Orchard, and Zillow Offers.

How much will Texas house buyers pay?

While you might expect to get less for your home in exchange for a quick, convenient closing, that won’t always be the case. Depending on the state of the Texas market and the characteristics of your home, an investor may be willing to increase their cash offer.

“Investors are resourceful,” notes Koren. “They find ways to make their investments feasible. Some will buy and hold based on appreciation, while others take on bigger renovation projects to buy at a bigger discount due to less competition.”

Koren has seen some Texas investors pay over 100% of market value due to the condition and location of a property, while other investors will only pay 70% of the value because they’re willing to take on the big-cost projects.

Lyon agrees that all cash buyers are different, and will have varying criteria for the homes they are looking to purchase. “Wholesalers, flippers, and renovation buy/hold investors will seek out discount properties that more closely follow the 70%-75% ARV (after-repair value) rule,” he says.

When calculating cash offers in his Texas home-buying business, he uses the following formula:

(After Repair Value) – (Repairs) – (Transaction Costs) – (Min. Profit) = Offer

“We don’t use a standard percentage rule — instead, we evaluate each property on its own, based on the market value and the associated risk with the given property,” he explains. “Every property will be different, thus warranting its own evaluation rather than a percentage calculation.”

Koren points out that most investors will lower their cash offer if a property has expensive issues. Two of the biggest sources of discounts in Texas are foundation problems and unpermitted additions. “Those two things come with unknowns that can cost a lot of money to fix and must be taken into consideration when making the offer,” he says.

Another factor that can bring down a Texas cash offer is a history of flooding. “When a home is in a flood zone, that can affect the property value, and the buyer may offer less than they would for a comparable home without the risk of flooding,” says Koren.

Homes aren’t always perfect — but some investors don’t mind

One of the biggest benefits of selling to a cash buyer — in Texas or anywhere across the country — is that you likely won’t be on the hook for expensive repairs. In many cases, cash investors will offer to purchase your house “as is.” This will likely translate as a lower offer so that the investor can hedge their risk — especially if your house has serious issues. But it also means you won’t have to worry about lists of to-do items popping up as a condition of closing. And skipping repairs can be a big benefit when selling in Texas, considering homes in the state can be prone to some pretty pricey problems:

Foundation issues

Dealing with a foundation that’s settling, cracking, or sinking can easily cost thousands of dollars to repair (around $4,907 on average, according to HomeAdvisor). And due to its shifting soil, the Lone Star State ranks high on the list of states that get saddled with these types of problems. In GroundWorks’ list of the top 15 metro areas with foundation issues, Texas cities occupied eight of those spots. San Antonio landed the #2 spot, largely due to its large amount of clay soil, which tends to shift and settle.

HVAC problems

Texas temperatures can vary widely, but you can bet on sweltering summers, with highs often rising above 100 degrees. Soaring temps mean the air conditioning has to work longer and harder, which can take a toll on HVAC systems. According to Consumer Affairs, Texas ranks #2 on the list of states most likely to need AC repairs, which can easily cost hundreds or even thousands of dollars to fix (or several thousand dollars if a full replacement is needed).

Roof repair or replacement

Texas might be best known for its hot, arid climate, but the Lone Star State can also experience cold winters, hurricanes, hailstorms, tornadoes, and thunderstorms, as well as the threat of wildfires. All of these potentially extreme conditions can wreak havoc on a home’s roof, especially when it was created with a less than durable or resilient material.

If you’re trying to sell a home with an old or damaged roof, the cost to replace it could be anywhere from $4,500-$30,000. In this scenario, it could make more sense to sell the house to a cash investor with the resources or expertise to repair or replace the roof.

Plumbing problems

The heavy rainfall in Texas can cause ground movement around the slab of a home, in turn disrupting the pipes and causing leaks. In addition to the skyrocketing water costs, the leaky pipes can be expensive to repair or replace.

Another common plumbing issue in Texas stems from tree roots that start to encroach on pipes and septic systems, causing breaks, leaks, and damage. Replacing pipes and plumbing lines — along with removing the tree roots to prevent further damage — can run up quite the bill.

“Typically, these types of issues cause a major challenge for homeowners due to the time and costs associated with repairs,” says Koren. “That’s when a Texas cash buyer with experience fixing these types of problems may be the best solution.”

The secret to selling for cash in Texas

Even in a seller’s market, finding a reliable cash buyer on your own can be overwhelming. To get started, HomeLight’s Simple Sale makes it easy and safe to get a competitive cash offer. Just enter the address of your Texas home, answer a few quick questions, and we’ll provide you with a full cash offer. Trade the repairs, prep work, and open houses for a fast, stress-free closing within days.

Header Image Source: (Daniel Halseth / Unsplash)