Selling Your House For Cash to a Real Estate Investor
Do you want to sell a house for cash? Are you looking for a real estate investor to buy your home? Lots of homeowners who find themselves in a tough financial position will find themselves searching online on how to find a buyer who’ll pay cash.
Some might even search for one of those common signs you see on telephone poles around town that say, “we buy houses for cash.”
If you are looking to move from one home to another fast, selling your house for cash can seem very attractive. There are investors looking to purchase homes with cash, offering you a quick and straightforward transaction.
Selling houses to investors has become increasingly popular, with around 20 percent of sales being cash only. If you need to sell your home quickly, it is often the best option, with closing possible in just days.
There are, however, pros and cons of selling your home to a real estate investor. Companies like We Buy Ugly Houses and others like them are going to offer you pennies on the dollar for what your home is worth.
So while you can get out from under your home quickly for the least amount of problems, is it really worth it? Selling to an investor for cash means you’ll be leaving a significant amount of money on the table.
If you’re wondering how much, it could be as much as 40-50 percent less than the market value.
Let’s take a look at who is buying homes for cash.
Who is Looking to Buy Your House for Cash?
Investors can come in and offer you a price for your house without involving a lender. There are three main types of investors who purchase homes for cash.
A relatively new business model, iBuyers uses house price data to offer competitive prices to sellers. They are interested in buying homes and selling them quickly, and at higher volumes than other investors. For this reason, they are the most likely investor you will encounter.
They have made a successful business out of buying a lot of homes, so you can expect an efficient selling process if you choose them. They look for properties that can be flipped quickly without the need for lengthy repairs. iBuyers offer less stress and hassle than typical home transactions, and things will progress quickly, with closing being possible just days after you have accepted their offer.
The good news continues with them paying close to the fair market value of homes. They do charge a fee for their services, however, and this can typically range from 7 to 10 percent. If the house needs some repairs, this can be charged to the seller as well.
The iBuyer model is entirely different from the “We Buy Ugly Houses” business model. With companies like We Buy Ugly Houses, they look for homes in really tough shape that can be bought super cheap, fixed up, and ultimately flipped for a profit. The fixer-upper house is their ideal property to purchase.
This type of investor is looking to buy homes that need a lot of work done to them, as such, house flippers are looking for a bargain. The lower they can spend on purchasing the home, the greater they stand to make when they sell it after it’s been renovated. A property flipper is the complete opposite of an iBuyer.
The downside of selling to a property flipper is they will not be giving you anywhere close to what you would sell your home for using a real estate agent. By selling for your house for cash to this type of investor, you’ll probably have a quick and easy sale.
Homeowners will need to weigh what is more vital to them – selling quickly or getting more money in their pockets.
Buy to Rent Investors
These investors are often individuals looking to buy homes for the long term. They want the passive income a rental property offers, converting the house if necessary, to get the best return on their investment.
Another name for this kind of investor is “buy-and-hold.” The principles are a little different than an individual who decides to rent out their house.
There are larger businesses involved in these types of investments as well, with some companies owning tens of thousands of properties across the country.
Selling to this sort of investor could offer a better price over house flippers, and they should be reasonably flexible on when the closing takes place.
Things to Consider When Selling Your House for Cash
If you are considering taking the selling house for cash route, there are some things you have to remember so that you can make the best choice for your situation.
If you are aware of the benefits, risks, and options, you will be better equipped to make the right decision.
Here are the advantages and disadvantages of selling your house for cash to an investor.
Going to a cash buyer cuts down on a lot of the work you would generally need to do. This will speed up the transaction considerably. Without the necessary time to make repairs, wait for lenders, or make your home look its best for showings, the sale can go through much faster.
There will be little preparation and staging. You will not need to interview multiple real estate agents, hoping you pick the best one.
Selling to an investor eliminates the need to have professional photography done or making sure your listing description is exceptional. You will not have have to go through the aggravation of showing your home to multiple parties before the property sells. There will be no open houses which are a waste of time anyway for sellers.
Avoid Having to Deal with Lenders
Property sales frequently get delayed or fall apart totally if there is a problem with the mortgage. Using a cash buyer removes this danger, allowing you to get to closing much faster than a traditional home sale.
While the vast majority of buyers are pre-approved when submitting an offer, there is still a chance a problem could arise. What if the buyer loses their job a week before the closing and can no longer move forward? What if an outstanding credit issue was missed that surfaces on the credit report just before closing?
When the buyer is paying cash, there is no chance there will be mortgage mistakes that could cause the sale to go down the drain.
Clauses in your sales contract can delay the sale considerably. They protect the purchaser, making sure they can get out of the deal if things aren’t perfect. While this is great for the buyer, it doesn’t help sellers much. Another way of looking at these clauses are chances for a buyer to back out of the sale.
Selling to an investor cuts out the clauses, for the most part. However, they may have a clause based on the results of the home inspection. Here are the most common contingencies you will likely avoid when selling your home for cash:
- Mortgage contingency – this is the most blatantly obvious one, as it’s a cash sale.
- Home inspection – more sales fall apart at the home inspection than at any other time of a real estate transaction.
- Home sale contingency – sometimes, a buyer will make the purchase of their home “contingent” on selling their own first—a terrible clause for a home seller.
- Lead paint contingency – if you are selling a home built before 1978, it is possible a buyer could do a lead paint test. Removing lead paint from a home is very expensive.
- Well water contingency – when you own a house that is not serviced by city water, it is likely the purchaser will do a water quality and quantity test.
- Radon contingency – one of the more common tests today from home buyers, is checking for radon in the presence of the air.
- Mold contingency – when it comes to health, nobody wants to hear there is mold in a home. Checking for mold in homes has become commonplace.
If your home needs significant repairs, selling as-is could be an excellent choice. House flippers might be your best option, as they are looking for homes that need renovations anyway. If you go to an iBuyer, you will normally have the cost of repairs deducted from the price they’ll pay you, and they may only be looking for homes with minor issues.
A house flipping company will be looking for run-down properties at a discount so they can turn a substantial profit. Unlike an iBuyer, who will buy homes that are in better condition with minor wear-and-tear issues at a more competitive price.
Selling a home “as is” can spare you from the time, aggravation, and money associated with expensive repairs.
Be on the Lookout for Scams
Whenever there is a lot of money involved, you should be on your guard to avoid being targeted by scammers. This is particularly the case with sell house for cash offers. You should do some research on any investor that you are hoping to sell your home to. There are many common real estate investor scams that could bilk you out of money.
A fairly common scam is charging a fee upfront and then not buying, You need to monitor your credit history as well, as it is not unheard of for a second mortgage to be taken out on your property. You run the risk of losing the equity in your home if a deal goes awry, so extra attention needs to be given to the business you will be selling to.
The Downsides of Selling to a Cash Investor
While you have seen all of the pros of selling to a cash investor, what are the downsides? The most significant disadvantage of selling to a real estate investor is all of the cash you’ll give up. Even though you won’t be paying a real estate commission, you’ll lose a TON of money going this route.
While the upside is avoiding a lot of the hassles and time in an ordinary sale, will it really be worth it when you lose so much money? Only you can answer that question.
Other Options Besides Selling For Cash
If you aren’t completely sure that selling to a cash investor is right for you, there are some other possibilities you might consider. It depends on your reasons for finding cash buyers, of course, but you may have more options than you imagine.
You could consider renting the home out. It will need to be in a decent condition, however, and you will have to be ready to do repairs or hire a management company to deal with it for you. The rental should cover your mortgage payments in most cases, allowing you to keep the property.
Another option is a rent to own agreement. This is where you rent the home out with the opportunity to purchase at the end of the contract. This can give you more money than a standard rental agreement, with the tenant paying for the option to buy.
You could still sell your home through a real estate agent. If you can find an agent who is experienced in selling homes fast, you will get more for your home that a cash buyer might offer. However, it is still likely to take more time than a cash purchase.
Be sure to understand the importance of hiring the best real estate agent. It can make a huge difference in the outcome. Avoid gimmicks like flat fee MLS where you get no service at all.
Steps in Selling a Home For Cash
- Collect an offer on your property.
- Have the contract reviewed by a real estate attorney before signing.
- Verify proof of funds – since it is a cash sale, you’ll want to know the buyer has the money to close.
- Collect an earnest money deposit. Depending on where you’re located, the earnest money is usually 1-5 percent of the purchase price.
- Get a title company or real estate attorney – again, depending on your location; you’ll either need a title company or real estate attorney to protect your interests.
- Have a final walk through – a final look is done by the buyer to make sure it’s in the same condition as when the offer was made.
- Do the closing – the closing will be the last hurrah before ownership is transferred to the new owner via a new deed.
Final Thoughts on Selling Your House For Cash
Without a doubt, there are pros and cons of selling your home for cash. It makes a lot of sense to take the time to make sure the investor you choose has been vetted. Consider doing a Google search to determine the reputation of the company. Look for reliable reviews before coming to a conclusion.
About the author: The above Real Estate information on selling your house for cash was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at [email protected] or by phone at 508-625-0191. Bill has helped people move in and out of many Metrowest towns for the last 33+ years.
Are you thinking of selling your home? I have a passion for Real Estate and love to share my marketing expertise!
I service Real Estate Sales in the following Metrowest MA towns: Ashland, Bellingham, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Natick, Northborough, Northbridge, Shrewsbury, Southborough, Sutton, Wayland, Westborough, Whitinsville, Worcester, Upton, and Uxbridge MA.