“We Buy Houses for Cash”, What Does That Mean?

These signs seem to have popped up everywhere, along the sidewalks, billboards, in your mailbox, you name it. If you own a rental property, you are probably also receiving daily postcards, calls and texts asking if you are interested in selling the property for a cash offer. Seems too good to be true, right? Here’s how these actually work.

Generally you start by submitting your information online or over the phone, and oftentimes an offer will be made immediately sight unseen. Next, someone will come out to the home to complete an onsite inspection and the final offer will be adjusted to account for all necessary repairs. 

While many of these companies are legitimate AND offering cash offers, they tend to not be the best solution for most sellers. This is because these companies purchase properties for bargain prices. As a seller, you are almost never going to get a price you could get by putting your home on the market. Even if it is sold as an as-is property.  

The benefit to their offer is it’s cash, and well, cash is king. When you sell your house for cash, you are bypassing the traditional listing process (which is typically the safest route to maximizing home value) in exchange for the convenience and certainty of a cash sale. Cash buyers are generally not your typical buyer looking for their next place to call home. They are investors trying to make a profit. Their goal is to purchase the home for the lowest price, fix it up and resell as the soon as possible.

When it might make sense to sell to a cash buyer: 

· If you need the home sold ASAP. For example, if you’re experiencing a divorce or an urgent move and time is more important that price, cash buyers could help you sell faster and with greater certainty. 

· You inherited a property. The home may be far away or in disrepair, selling to a company can help you turn unwanted property into cash. 

· If you are facing foreclosure and you are almost out of time. Selling to a cash buyer might save you from losing all your equity in the home. 

· If the house is in very bad condition and you don’t have the time or money to make repairs. 

Selling to a cash buyer company CAN be a good solution when speed is more important than cash after closing. However, this convenience can come at a high cost. There are other options to sell your home in a short time without sacrificing a ton of equity. 

In order for these companies to have the profit margin they want the need to “buy right”. The companies may tell you that they pay full price but that is based on the condition of the home. From our limited experience with these companies and researching others experiences, most of the companies are paying 50-80% of the market values.

If you can afford to wait, you usually end up with much more cash in your pocket by selling your home with an agent. Especially in today’s market, homes are selling quick, so you may not find there is a significant time difference between a cash company and putting your home on the market. By putting it on the market, it could add tens of thousands to your final number!

If you’re thinking of selling to a ”we buy houses for cash” company, it pays to compare the alternatives. If a realtor understands your goals, they may be able to help you overcome the downsides of a traditional market including the time and repairs, by setting a lower price and marketing your home specifically to investors or buyers who are willing to assume any work needed. Learn from an agent their ideas of how to meet your sales goals, and what your home is worth in its current condition. If you still want to explore those cash companies, then you will be able to make an informed decision. Although not necessary, you may still want an agent or an attorney involved in the process. Many of the cash offer companies have their own purchase agreements which favor the sellers. The state approved forms are designed to protect and favor the buyer. In one experience with these companies, they tried repeatedly to get the seller to use their title company (it is illegal for them to require you to use their company). It also had hidden cancellation fees, required the earnest money to be deposited with the title company not the buyers trust account, and did not pay outstanding water bills. It can really save you money to work with someone that is comfortable and knowledgeable about these legal forms!

Lastly, if you are looking to sell your home in an “as-is” sale with a quick closing. We work with several small private investors who offer many of the same benefits as these companies, but the bottom line might just be higher for you, as a seller.