You have probably seen signs at intersections or heard radio advertisements mentioning company XYZ that will buy your house quickly for cash, as is. It's an enticing concept with a handful of benefits:
- No potential for a complicated closing.
- No need to pass inspections.
- No responsibility to keep the property cleaned up for showings.
- No open houses that inconvenience your tenants.
- No need to pay real estate agent fees.
Companies that buy houses for cash can be a great option for some property owners, but it does come with caveats. Find out who these companies are and how they work so you can decide whether selling your property to a homebuying company is right for you.
What does it mean to buy a house for cash?
Selling an unwanted property that needs work can be a burden whether you're a real estate investor or an heir or anything in between. If you have an ugly house or there are major renovations needed, many retail buyers will be unable to purchase the house regardless of whether they want to or not. When an individual or a company purchases a house with a cash offer, they don't have to go through a mortgage broker, realtor, or any other red tape. This allows them the flexibility to meet the needs of the homeowner in ways that a traditional realtor sale does not. Here are a couple of the key benefits of selling to a cash homebuying company.
- Choose whatever closing date you want. Closing can be in 10-14 days or as long as it takes to purchase a new home. In general, the closing timeline in a cash closing is flexible so that the homeowner is able to close in whatever time frame works for them.
- The company will buy an ugly house without hesitation. A hole in the roof, a broken air conditioner, or outdated electrical won't need to be fixed for a four-point inspection, which can save the owner significant time and money on costly repairs.
- Offers conveniences you wouldn't be able to achieve with a typical retail sale. Showings, open houses, and negotiations with the potential buyer (to fix the leaky sink, for example) are all a moot point. If you're a real estate investor looking to sell, you don't have to bother coordinating showings with your renters.
- Simple offers and simple closings. The company runs the numbers and makes you a cash offer. If you accept, there is a very likely chance it will close. With a retail buyer, there are a number of points in which the transaction can fall through if there's an issue with an inspection or the financing falls through after an appraisal. A traditional offer is never a guaranteed sale, whereas the cash buyer is typically a sure thing.
How do companies that buy houses for cash make money?
Selling real estate to a cash buyer sounds great, but it does come at a cost. Companies that buy houses for cash make their money by selling your property to investors in the area or by house flipping after making necessary repairs, depending on the particular house-buying company model. If the company is a wholesaler, it will need enough room between the cash offer and what it wants to make as a fee after selling it to another investor. And if they're a flipper, they will need to be able to sell the real estate for a profit after making any repairs and improvements.
This means they're going to be offering you at or even slightly below market value. It doesn't mean that it won't be a fair offer: Depending on the state of the property and the conveniences that accompany a cash buyer, you may make a little less money but make up for it in other ways. Remember, you don't have to catch up on back property taxes or pay higher closing costs as with a typical sale. And there are times when a house is literally unfit for anything other than a cash sale due to its condition.
How to find a company that buys houses for cash
Responding to a postcard or calling the sign at the intersection is a realistic way to sell your house for cash. You can also search terms like "sell my home for cash" online, and local real estate investors that buy homes for cash in the area will pop up. Some property owners may be hesitant that it's a scam or they won't get a fair price. However, in most cases, the advertisement is coming from a local investor or even a Realtor in your area looking for inventory to fix up and rent or resell. You don't have to accept the offer if you feel it's below fair market value. Keep in mind, intuition can go a long way too; if they're pushy or try to get you to sign a contract on the spot, you can always just say no.
Aside from selling to an individual, you can also sell burdensome houses to a company that specializes in cash, as-is properties. We've all seen the "We buy ugly houses" billboards for decades, and they are certainly a cash-offer company, but there are also a multitude of online cash house-buyers now, like OpenDoor, Zillow, or Redfin. For example, you can get a Zillow offer within minutes of filling out their online application -- all from the comfort of your office chair -- making the selling process a breeze.
Pros and cons of selling a property to one of these companies
We have covered a lot of the positive and negative aspects of selling real estate to a buyer who specializes in cash purchases. You may still be wondering how it compares to selling real estate the old school way with a real estate agent. A major concern of selling to a cash homebuyer is missing the opportunity for competition in the open market, which you will only see by listing with a Realtor or potentially on your own via one of the many online listing platforms. It does give you the chance for multiple offers, including those above asking price. But remember: You will have to pay your real estate agent for their efforts, so take that into consideration when comparing the potential home sale price after commissions to a fair cash offer.
Selling your home for cash -- Is it right for you?
If you're looking to get top dollar for your real estate, you are in no rush to sell, or you're capable and able to spend the time and money to fix the house before selling, then seeking out a cash offer is probably not in your best interest. Selling real estate to a company that buys houses for cash can make sense for someone who has a rental property with uncooperative tenants, a house that needs significant repair, or an investor who needs to close quickly in order to move on to the next deal. Ultimately, you'll need to weigh the pros and cons to make a choice that's best for you. Plus, there is no harm in getting a couple of offers from a company like this before you decide to list with a Realtor. You might be surprised at the cash offer you receive, and it may be high enough to justify not taking the time a traditional sale necessitates.