Should you sell to a cash home buyer? What are the advantages? Where can you find them?
If you are considering selling your house, a cash home buyer might sound like an appealing option. The big questions most property owners have are how much they can really expect to get from a cash buyer versus others? If the math might work out in your favor, what are the pros and cons of the different ways to connect with them?
What is a Cash Home Buyer?
There are three main types of house buyers out there in the market today:
- Buyers needing a bank mortgage loan for financing
- Buyers seeking seller financing opportunities
- Buyers who can and are willing to pay all cash for properties
Despite some of the hype and marketing out there, cash paying buyers who would actually want to live in your property are very few. Consider that less than 90% of the population has $5,000 in savings.
That means you’d be hoping to land the top 10% of affluent people to purchase your home. In most cases these wealthy buyers also prefer to finance their purchases because they are looking at more expensive homes, are seeking tax advantages and asset protection benefits of having a loan on their home.
What is more common to find is cash buyers who are real estate investors. They are willing to pay all cash for a swift closing and to avoid finance costs. This group is typically looking for properties which they can fix up and rent out to tenants, or can renovate and update to resell later on.
Those that really have the money typically organize themselves as businesses. They may even be funds or partnerships which have the combined capital of a number of private investors. So, for the purpose of this report we are focusing on finding a cash home buyer who is a company that buys houses.
How to Find a Cash Home Buyer for Your Property
There are a variety of ways to search for cash buyers for your house. Let’s take a look at some of the pros and cons of each.
You can always just hit up Google, Siri, or Alexa to search for cash home buyers.
You can simply try to Google “we buy houses companies in (your city.)” or “sell my house to an investor in (my city).” It’s fast and easy. It can save a lot of time and money versus trying to do a bunch of DIY marketing to attract buyers to you.
Recently there has been a big explosion of people trying to get into this space to buy properties. Some are good. Though there can also be a lot of work to do to separate the newbies and opportunists from the serious and those that really have the cash to buy.
Craigslist has taken over as the most popular classified ad platform. You can post your property for sale there too.
Listing your property on Craigslist.com is pretty fast and easy. It is even free in some cities. This allows buyers to find you, instead of you having to look for them.
It can be harder to be found on Craigslist than you think. Many scammers and Realtors use it, and can bury your house listing under hundreds of others within minutes or hours. Even if that doesn’t happen, you might find you just get bombarded by low ball offers from those looking for absolute steals, or have to try and filter out all the scammers and criminals. Or you may just get dozens of calls from agents who want to list your house for sale, not buy it.
Ask a Real Estate Agent
You don’t necessarily have to list your home with a Realtor to get them to connect you with a cash buyer. They may know someone with the money who has already been looking for a property like yours.
A great agent may have an established network of ready buyers who can pay cash and close fast. You can still expect to have to pay their commission, but this can speed things up, without being locked into a contract.
Unfortunately, many agents are not as successful as they make themselves out to be. They may not have those connections. Or some will say they do, and try to get you to sign their contract and lock you in, only to leave you stuck in a long listing arrangement. Some will just harass you and try to scare you into listing with them, instead of listening to you and your concerns, or what is in your best interests.
How Much Will a Cash Buyer Pay for My House?
How much a buy of any type will offer and pay for your house depends on a variety of factors.
Condition of the Home
Many regular home buyers who are looking for somewhere to live, or who are new to investing in real estate may make a lot of demands when it comes to condition and repairs. Or they may just be scared off, because they aren’t sure how big the job is, how much it will cost, or they don’t have the cash to do it.
If they do make an offer they are likely to include clauses which allow them to back out after inspections, or require you to pay for, and possible make the repairs before the closing. That can be risky as a seller as they may not close, even if you have the money to do it.
The best cash buyers will be willing to purchase you home “as-is.” It doesn’t matter if your home could just use a few touch ups, needs updating, or has serious water, wind, or fire damage… they will buy it. However, they will have to price these factors into their offers, as these are items they will have to pay to fix out of their own pocket after they buy it.
How appealing is the neighborhood right now? Are there a number of other properties up for sale? Have they been taking a while to sell? How are they priced compared to yours? Do neighboring homes and neighbors look appealing and friendly, or are they detracting from your home’s value and rental potential?
Macro Market Factors
The economy and housing market in general definitely play a role in how much people should be willing to pay for your home. Have interest rates gone up, or are expected to go up? This could make the home far more expensive in real terms, even if the price isn’t any higher than a few years ago. It could make it a lot harder to rent or sell in the future. What direction is the market headed in? If it has been going up, it could be about to head down soon. A buyer may have to factor in that they’ll be taking a 10% to 20% drop in the value in the months ahead. The same goes for rents.
Net Proceeds to You
If you list with an agent, they may promise you a higher price that they can never get you. You’d also have to pay at least one or two agents a commission. That can mean a 6% loss right off the top, and you may have to pay taxes on that money too.
You won’t have to pay those commissions if you go direct with a cash buyer. This also means being able to sell a lot faster, and avoiding more holding costs, and the risks that can come with waiting. Expect there to be some balance in this priced into the offer.
Ultimately the best way to find out how much a cash buyer will pay for your home is to reach out and contact one that is local. It doesn’t cost you anything to ask, and you might be really pleased with the number.
The Benefits of Selling a House to an All Cash Buyer
Aside from just getting all cash right away, there are an array of important and very valuable benefits of selling directly to an all cash buyer.
A traditional real estate closing through a real estate agent, with a financed buyer can take a long time. It can sometimes take months to coordinate appraisals, title, insurances, and loans. That’s after you sign a contract. A cash buyer can typically close in a matter of days. Though the best will also work with you on a closing date and time that works for you, if you need more time to move.
Going to contract with a buyer relying on financing can be very risky. Especially now. There can be a lot of extra demands on you as a seller. Lenders can be very fickle and you never know when the deal will all fall apart. The borrower could lose a job, change their mind, the appraisal may come in short, lenders may demand repairs to be made in advance, or they may just run out of money before the transaction is funded. Unfortunately, this often all happens at the very last minute. Then you may be left starting all over from scratch.
Or if your home is vandalized, a storm hits you, a neighbor sells cheap, or the market changes during the long process, the deal can be cancelled, and you’ll have to try to sell it again, for less.
All of the above, including the marketing time of taking the DIY for sale by owner approach and doing your own marketing, or waiting on a real estate agent can mean months of stress, uncertainty, and sleepless nights. Selling should be a positive thing, not a stressful one. You don’t need to put your health and sanity, or relationships at risk, like that if you choose a cash buyer.
Higher Net Proceeds
While a cash buyer may offer a little less than a Realtor is willing to list at, you can still end up pocketing more money, and that’s what’s really important. This is due to fewer costs, as well as avoiding the risks of waiting, and the expense of holding costs. Every day you wait for a closing means property taxes, utilities, and often interest, association fees, and even legal fees too. That all comes out of your net cash. Close faster with a cash buyer and you’ll keep more of the sales price.
There are actually many tangible advantages of selling direct to a cash buyer. There are a number of ways to find or attract them too. Each has its pros and cons. Equipped with this information you should be able to make an educated decision on what’s best for you.
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