Selling your home can be an emotionally taxing and time-consuming process, especially if you want a quick, low-key experience. An unexpected death in the family, divorce proceedings, or increased debt often make the sale more difficult; But whether it is facing financial pressure or looking to downsize, it can always be sold for cash through unconventional channels such as direct mail.
However, cash sales often mean leaving some additional funds unrealized and this begs the question is selling your house for cash a good idea?
Here we’ll delve into what it means to sell a cash house, its benefits, drawbacks, and how-to process. Additionally, where can one request such offers and more?
What does it mean to sell a house for cash?
Selling a house for cash entails selling to buyers who possess enough savings or the equivalent in bank accounts to purchase your property outright and pay you in cash without using mortgage loans or similar mechanisms. When accepting offers of $350,000 from cash buyers, proof must be shown of having that $350k ready in a bank account or elsewhere before proceeding with their offer.
Working with an off-market buyer who invests in homes requiring repairs or is otherwise available at discounted prices requires specialization and collaboration.
According to the National Association of Realtors, cash buyers comprised 28% of home sales transactions in March 2024, attributing to many buyers using equity from previous home sales as leverage against higher mortgage rates.
NAR reports that 80% of recent buyers used mortgage financing when purchasing their homes. Thus, finding buyers willing and capable of making all-cash purchases remains relatively rare.
To secure a cash offer for your house, it’s necessary to work with either an established house-buying firm or an individual investor with sufficient reserves to make an offer in cash.
After taking several steps to evaluate and make an offer on a home, buyers are usually required to either write a check or wire money securely via electronic transfer for their full offer price at closing.
Cash investors generally offer up to 70% of market value; for iBuyer companies this number could go as high as 90% depending on the home and local market factors.
Reasons to sell a property for cash
Now that you understand how cash for a home can work, is selling for cash a viable option?
Will Holly of Holly Nance Group in New Jersey notes the value a cash buyer provides: convenience and speed. “By working directly with one cash buyer instead of multiple negotiations over time with multiple buyers, time will not be lost negotiating among multiple parties,” according to Holly Nance Group owner Will Holly.
“Cash transactions make selling easier for both buyer and seller alike, taking away much of the pressure,” says Mark Abdel, one of Minneapolis’ premier real estate agents, selling properties 62% faster than average agents in his market.
Here are some benefits:
- Faster closing
- No repairs or home staging
- Reduced closing fees
- Smaller holding costs
- Peace of mind
- Interest rate immunity
- Flexibility
What’s the process to sell a house for cash?
Working with a cash homebuyer differs from the traditional agent-assisted process in many ways. Given is a 7-step guide to sell a house for cash.
Request an Offer
Before making your request for offers, communicate whether the sale will take place “as-is” or if any repairs will need to be completed first.
House is Evaluated
Buyers need to research the property in question to assess their options and decide on an offer price.
Review the Contract
As the seller, you should review any offers presented, taking note of contract prices and terms before deciding if you wish to accept or not.
Complete inspections
Even when selling “as is”, your potential purchasers may still perform steps such as an inspection and appraisal.
Fast Forward to Closing
Without lender involvement, no appraisal or loan processing proposal would be ordered by them.
Clear Title
Buyers require title searches to ensure that any property acquired can be conveyed without claims and judgments being filed against it.
You Get Paid
Your buyer will likely wire funds directly into your bank account within weeks or even days after closing on their sale of your house.
Who buys houses for cash?
Are You Wondering: “Can I Sell My House to a Bank?” Well, there may be better solutions available to you.
Cash buyers or house-buying companies, more commonly referred to as house-buying services, are individuals and entities that purchase your house for cash outright and usually in its current condition, without needing lender financing. By choosing cash buyers as opposed to conventional methods for selling your home, selling directly can provide greater freedom from home prep hassles, showings, staging requirements, flexible closing timelines that coincide with buying another residence – not all cash buyers share similar business models, so be wary when approaching one for an offer on your house. To make things easy we categorized these buyers into several broad categories that you’re likely to encounter when selling your property to cash buyers based on what type of buyer type you might encounter most often when selling to cash buyers:
- Investors
- iBuyers
What are the downsides of selling for cash?
If what you’ve read so far has persuaded you to sell for cash, that is fantastic. But be mindful of a potential drawback: cash buyers typically offer lower prices compared to the market.
House-buying companies usually pay less for your home to account for repairs they must make themselves. After conducting an evaluation walkthrough of the property to see what work it needs doing, this helps determine how much they are willing to offer in terms of an offer price.
“Return on investment depends on a range of factors such as market and home conditions; typically a 10%+ yield makes any purchase worth its risk.
Everything must look brand new after repairs. This may involve gutting an entire home or simply doing a cosmetic makeover. Turnaround time usually ranges between four months from when he purchases and renovates before selling off a property he purchases as his next flipping project.
Depending upon your situation, cash buyers’ lower offer price may or may not be of much importance; depending on how the offer was structured. Selling on the open market often yields better prices as traditional buyers envision living there themselves whereas with cash buyers there typically won’t be as many emotional attachments; they take it all business-like.
How much do cash home buyers pay?
Many house-buying companies and investors will offer various amounts for homes they purchase.
Based on its condition, price point, and location, your house may appeal to different cash buyers more than others. Most real estate investors use an “investor buy box,” with parameters on what types of properties are most valuable to them; that said, what your house might be worth will differ even among buyers willing to make immediate payments.
Flippers often abide by a rule known as the 70% Rule when purchasing homes to flip. Under this plan, no more than 70% of their ARV (after repair value) should be spent. Deductions made for repairs and renovations also factor into this figure.
As opposed to We Buy Houses flippers, iBuyers typically pay closer to market value as they target newer homes in good condition. They charge a service fee typically about five percent in addition to closing costs between one and two percent which typically cover fees such as escrow fees, title fees, and transfer taxes. Once accepted by an iBuyer offer they then inspect your home before subtracting estimated repair costs from its final offer price.
Buy-and-hold investors fall somewhere in between flippers and iBuyers; typically paying more than flippers but less than iBuyers while seeking returns between 8-12% from their investments.
Are cash-for-homes companies legit?
In short, the answer to this question is in the affirmative; there are numerous legit companies out there offering home sales for cash with exceptional experiences and reliable promises. As always, however, we advise doing your due diligence on any buyer before providing sensitive data or signing contracts.
How long does it take for a cash buyer to close?
Finding ways to close traditional sales and making sure a buyer’s financing is in order can be a lengthy process, taking an average of 42 days today in our market which equates to about 15 weeks’ worth of waiting!
A company offering to buy homes for cash will usually show proof of financing for the amount being offered and can close in as little as ten days.
Conclusion
Home for sale for cash for speed, convenience, and peace of mind. While offers may be lower compared to selling on traditional markets, sometimes cash buyers offer greater returns – it pays to weigh the benefits against drawbacks when selecting their offer! When considering various cash buyer options carefully find one that best meets your needs.
Read More: Sell My House Fast
