Here’s How to Find Cash Homebuyers
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Most homebuyers need a mortgage to close on a house, which can make the process time-consuming and nerve-wracking for everyone involved. You may be able to close more quickly if you can find a cash homebuyer. These buyers could be local investors or a growing company trying to make home-selling easier.
Let’s explore the different types of cash homebuyers and how best to sell your home to one of them.
In this article:
- What is a cash homebuyer?
- Who are typical cash homebuyers?
- What is the process to sell a home for cash fast?
- 3 tips for selling your house to a cash buyer
What is a cash homebuyer?
A cash homebuyer is a person or investment company with the resources to buy a house outright in cash, without needing a mortgage. Cash sales made up 20% of residential real estate transactions as of November 2019, according to data from the National Association of Realtors.
Because there’s no financing involved, buying a house with cash often takes less time. They’re also less likely to fall through at the last minute because of an approval snafu — making them more attractive to homeowners who need to sell a house fast.
In exchange for these advantages, though, cash homebuyers will often seek concessions during the negotiation process, like offering less than list price or asking for a faster closing.
Who are typical cash homebuyers?
While there are cases where a traditional buyer would be able to pay cash for a home, cash homebuyers tend to come in a few different categories. On one side, you have home investors looking to turn a profit from renting or from a quick sale. On the other, you find a new breed of company that aims to make it easier for people to buy and sell homes online.
Real estate investors
In many parts of the country, it’s cheaper to buy a house than it is to rent one. That means there’s money to be made by buying a home and converting it into a rental. Real estate investors who buy homes with all cash range from local landlords to Wall Street-backed corporations like Blackstone spinoff Invitation Homes.
These large real estate investors, however, make up a small percentage of the market. In the first quarter of 2019, just 1.9% of single-family homes were purchased by institutional investors, according to research firm ATTOM Data Solutions.
House flippers seek to make a profit through buying homes, fixing them up and then reselling them for a higher price. Increasingly, these real estate buyers are paying cash, according to ATTOM Data Solutions.
Purchases with the intent to flip account for roughly 5% of the U.S. home market. More than half of these purchases are made with all cash.
In recent years, iBuyer companies such as Zillow Offers, Opendoor, Offerpad and RedfinNow have exploded in popularity. These companies buy houses for cash then fix the property up, market it and resell it. This allows homeowners to move forward on buying their new home without needing to wait for their former home to show and sell.
What is the process to sell a home for cash fast?
Selling a home for cash will likely be a faster process than a traditional sale, but there are still a number of steps in the homebuying process you and your buyer will need to take.
There are times when it’s not necessary to hire a real estate agent to list your home. If you’re looking to sell to an iBuyer company, you’ll need to submit your address and information on their website and wait for them to follow-up with an offer.
In some cases, cash homebuyers will come to you. Home flippers buying houses with cash tend to target homes in need of major renovations that they can buy at a discount then repair and sell quickly for a profit. Other investors are known for sending postcards or letters to homeowners in tight markets or rapidly appreciating areas offering to purchase their property. They might promise a quick closing and offer to close without using a real estate agent.
Different types of cash buyers have specific pricing strategies. Typically, iBuyers use their own algorithms that determine what the home is worth. Investors may offer the list price for a quick process, or bid significantly under the list price hoping the seller will take advantage of a cash offer. In some cases, a cash buyer will try to determine how much you owe on your mortgage and offer just slightly more than that amount.
Once you agree on a sales price, cash homebuyers will have varying processes for closing on a home. One of the key advantages cash buyers have is the ability to forego the appraisal process, although some buyers may request one. Some investors will waive the home inspection to speed up the process. However, iBuyers will perform a home inspection and adjust their offer price for repairs or defects before closing, which you can choose to accept or not.
Sellers who typically receive cash offers
Cash homebuyers typically seek out certain types of properties and situations, including:
- Expired listings
- Mortgage defaults
- Bankruptcy or other financial distress
- Divorce proceedings
- Vacant or damaged homes
Pros and cons of selling your house for cash
|Faster closing. You won’t hassle with contingencies for an appraisal, home inspection or mortgage financing.||Lower sales price. In many cases, cash homebuyers will offer below list price so they can make a profit.|
|Fewer fees. You won’t have to pay a real estate commission fee or seller credits for repairs, in many cases.||Higher risk. Some cash-buying companies are actually scammers who will take the deed to a home without paying off the mortgage.|
3 tips for selling your house to a cash homebuyer
- Carefully vet the buyer. “Cash for homes” deals can be scams. Make sure you do some research to see exactly who is buying your home and how they do business.
- Get multiple offers. Inquire with multiple iBuyers or investment groups interested in buying a house for sale by owner to see who offers the highest price and fewest hassles. Even if you’re trying to sell your home fast for cash, request the buyer’s financial statements to ensure they have the cash on hand to close so you avoid potential headaches later on.
- Skip the real estate agent. With fewer fees and hassles, you may choose to work without a real estate agent, which eliminates the need to pay a real estate commission. However, you may want to have a real estate attorney look over the purchase contract to ensure you and the cash buyer are following your state’s laws for real estate purchases, and that the ownership is transferred and recorded properly.