What’s the Deal with “Cash Buyers” everywhere you turn?
In today’s real estate market, nationally, homes stay on the market for about 25 days on average before attaining a pending sale. That’s better than back in 2010, when homes were averaging 140 days to sell, but it’s still not the one-day sale you hear about on the news, and there’s no guarantee that your home will sell in 25 days. Location, season, and many other factors affect how quickly you can sell a home. (Check my Facebook page for some location specific stats.)
If you need to sell your home quickly, those “We Buy Houses for Cash” billboards may have caught your eye. Can you really sell your home as-is in just a few days?
Who are they?
“We buy houses for cash” buyers are not your typical buyer looking for a home to live in or rent out. They are real estate investors looking to make a quick profit.
As such, they are looking to purchase a home for the lowest price possible, fix it up as needed, and sell it on the open market a short time later. These types of investors can make a huge profit on a home in just a few months.
Who do they target?
These cash buyers are looking for motivated or desperate sellers. For example, let’s say you listed your home, but the listing eventually expired without resulting in a sale. At this point, you would probably be contacted by a cash buyer. They’re hoping you’ll be discouraged by your failure on the open market and will be willing to sell your house for cash at a reduced price.
In the same vein, cash buyers go after people in situations that require a fast sale such as divorce, bankruptcy, foreclosure, and probate sales.
Are there benefits?
For many people in pressing situations, selling a home quickly might be the number one priority, over maximize return. And selling to a cash buyer can be fast.
The typical financed purchase takes 30+ days to close. Inspections, appraisals, title searches, and other procedures take time, and they must be done before funds are released. (Cash buyers can close faster.)
Cash buyers don’t have to deal with that. They’ll typically come to your home within a day or two of you contacting them and make an offer on the spot or soon after. They often process the sale in-house and have a title company at the ready to clear the title. (But what if it doesn’t?)
Cash buyers also eliminate the inspection and objection process by simply buying a home “as-is”. In only a few days, your house will be sold and you’ll be turning over the keys.
Sounds easy enough. What’s the catch?
Say goodbye to any profits and probably the equity that you’ve built up in your home. The offer that cash buyers make is often suspiciously just enough to pay off your mortgage. (Yes, they have programs to find out how much you owe.) You will likely only receive 50-80% of market value because they need to keep room for their profit when they resell or your home is not worth buying.
80% of market value might seem like it’s worth it to avoid the hassle of going the conventional route, but the national average is more like 65% of market value.
Another reason to be extremely careful with these types of companies: scams. Just like any place there is an opportunity to extort money, phony investors have all sorts of tactics and tricks to extort money from desperate sellers. You don’t want to lose money, or worse, your home, just in an effort to save time or avoid showing your home.
In short, if you are considering selling your house to a cash buyer, do your research first. Selling a home to get out from under it isn’t the only alternative you have. There are other, more profitable options.