When you’re selling your home, you’ll likely learn about a lot of things you never knew about before. For example, did you know some people make cash offers on homes? Typically, when someone is buying a home, they’re actually taking a loan out from a bank in order to make the purchase. Sometimes, however, you may receive a cash offer.
With a cash offer, the buyer does not need a loan from the bank, and can rather buy the property outright. While traditional homebuyers might think that cash offers are rare, this actually isn’t the case. According to Redfin, nearly a third of all US home purchases made in the first four months of 2021 were paid for in cold, hard cash. Typically, cash offers like these will come from investors, iBuyers, or buyers who have just sold their homes.
The History of Cash Home Buyers
Cash buyers have generally always had the upper hand on the market. This is because there are fewer contingencies, which can speed up the process tremendously. The requirements and paperwork are also less strenuous with cash offers because things like appraisals and lender fees can be avoided altogether.
Current trends in today’s real estate market see cash offers on an uprise. According to Redfin, the surging stock market and rise in working from home have had an effect on the number of cash offers today. Those who are leaving the expensive cities can sell their homes and purchase a more economical one in a smaller town for cash.
Investors are getting back into the housing market as well. They often bring cash offers to the table with plans on flipping the property. There is also the increase in emerging iBuyers – tech companies that make nearly-instant cash offers on homes. These companies use algorithms rather than real estate agents to buy and sell houses quickly.
The Myths of Cash Home Buyers
Many people assume that cash buyers always bid low. While this may be true in some cases, with today’s seller market, you’re very likely to get competitive cash offers. Buyers often consider making cash offers in order to stand out from the competition. If that is their main goal, they’re unlikely to lowball their offer. Not to mention, you’ll likely be saving some money by accepting a cash offer, so you can take this into account when considering one.
That being said, it’s also a myth that a cash offer will always be your best choice. Although cash offers can speed up the process and save you money, it’s still a good idea to consider your options. Why would you accept a lower price if you have two offers, especially if the financed option is unlikely to have issues?
Another common myth is that cash buyers are all scammers. There was a time when many scam artists put a bad name out there for all cash buyers. In reality, most cash buyers simply don’t need to finance their home purchase. It is always smart to do your due diligence, no matter if you’re selling to a cash buyer or someone financing through the bank.
How Cash Home Buyers Work
Once you have found a cash buyer and negotiated a purchase price, the first step to get the sale rolling is to sign a contract. It’s always a good idea to be working with a professional real estate agent to help you throughout this process. One with experience in cash sales will also prove helpful for you. After you’ve completed a purchase and sale agreement, you’ll need to verify that the cash buyer has the funds available. This process typically involves earnest money and proof of funds such as bank statements.
You’ll still need to hire title and escrow companies to help facilitate the sale and transferring of the title. They will handle titles insurance, liens, closing documents, and all the legal paperwork. Since you’re not working with a bank, you should have more freedom with which companies you use for this process. Again, working with an experienced real estate agent can help this process go smoothly.
If the buyers did request an inspection, it would be completed at this time. Then, it’s closing day! You and the buyer will have plenty of paperwork to sign which should be sorted by the title and escrow companies. Once everything is signed, including the title deed, the transaction will be complete.
What to Expect with a Cash Home Buyer
The process might vary a little bit depending on where the cash offer is coming from. Investors and iBuyers might be willing bypass contingencies such as appraisal or inspection because they plan on using the house as an investment. They are willing to buy the home as-is and handle any repairs that may be needed by themselves. If you’re in a hurry to sell your home, this may be a great option. With iBuyers you can get offers in as little as 24 hours.
If a private home buyer who just sold their house or simply has enough money to make a cash offer is planning on living in the home, they might want to have the house appraised and inspected the same as if they were purchasing the home with a loan. With these types of cash offers, they may offer other incentives to increase their chances of you accepting their offer over others.
Bottom Line on Cash Buyers
When you’re considering selling your house to a cash buyer, you don’t need to assume that it’s automatically the best deal. Take into consideration the price of their offer, what contingencies are in place, and the timeline for both you and the buyer. Then you can make an informed decision about whether accepting a cash offer is the best plan of action for you or not.