80 percent of people that sell a home do so in what would be considered the traditional or standard way. A realtor is hired and that realtor compares the home to similar homes in the same general area or neighborhood to come up with a listing price. The home goes through a process of being prepared for showings, and it is listed. The realtor will eventually collect a commission for selling the home which is paid out by the seller. This traditional approach involves a great deal of paperwork, can be very time consuming and there are several complications that can arise in this type of transaction. Those complications include things like hiccups with the buyer’s financing of the home, contingency clauses that may allow a buyer to back out of the sale, and a timeline that can drag on for many weeks after an offer is accepted on the home. So what do the other 20 percent of people that are selling homes do? They sell their homes for cash. This type of transaction offers up a multitude of advantages when compared to the standard approach. The speed of the sales process will be much faster, investors will often buy the home “as is”, there are fewer instances of deals falling through, and there are no loans involved so the financing process can be a much more pleasant one.
Close the Deal Quickly
One of the main advantages in selling a home for cash is the speed in which the sale can be completed. Once an offer has been accepted in a cash only transaction, it can be a matter of days before the money has changed hands. In a traditional sale, once an offer is accepted it can still be weeks before everything is finalized.
In the 20 percent of home sales that are cash transactions, the vast majority of the buyers are investors. Investors typically like the cash only deals because they can close quickly and get started on the process of fixing up or improving the home. Investors don’t typically set up multiple showings and then go through haggling on a final purchase price. They often ask some questions about the home and make an offer. The whole process can be finished in a matter of weeks rather than months. Another advantage to the seller is that they are often able to avoid staging a home, hiring a photographer, and figuring out a marketing plan for the sale of the home.
In some cases, the seller of a home simply needs to get the deal done so they have cash to relocate to a new area, or because they are trying to avoid some type of financial crisis. An all cash deal can help with both of these scenarios.
Sell Your Home “As Is”
When investors make a decision to put money into an all cash home purchase, they typically don’t spend time trying to negotiate the fixing or renovating of anything in the home. In most cases, the cash offer will be made for the home in its current condition. With a traditional home sale, those same items usually need to be fixed before the home gets listed. Updating a bathroom or kitchen, for example, is something that a realtor would likely tell a seller they need to do in order to sell the home. A cost vs. value report from 2016 showed that there is really no return on investment for making those type of home improvements, so is it really worth the time and money?
With a traditional home selling process, there is also the matter of the inspection that has to be completed before the sale can be finalized. This inspection can create another entire list of things that need to be fixed or updated. It is common for the seller of the home to be the one to pay for these repairs and updates. This can include minor things like painting or improving some landscaping all the way to major expenses like replacing a roof. When a home is sold for cash, any improvements or repairs that need to be made are usually handled by the buyer after the sale is complete.
Cash is King
From 2015 to 2016, the number of traditional home sales that went from active contingent or pending back to the house being listed for sale nearly doubled. That trend continues to move upward in 2018. During the traditional home sale process, an offer can be accepted, inspections can be completed and the entire process can still fall apart when the buyer actually goes to secure the loan for the home. With the trend moving upward, it is understandable why selling a home for cash is looking like a better option. When a loan isn’t part of the transaction, that obstacle is eliminated and the sale of the home can proceed as planned.
A lack of financing isn’t the only thing that can bring a home deal to a screeching halt. In many contracts there are contingency clauses written in that are designed to give buyers an added layer of protection. An appraisal contingency is a common clause that would allow the buyer to back out if the final appraisal value doesn’t hit a certain mark. An inspection contingency is another common practice that allows the buyer to back out of the sale based on the results of the inspection. There can be varying benchmarks that need to be met with this type of contingency, but they simply don’t exist when dealing with a cash only offer. Investors plan on making the necessary repairs or improvements to a home after the sale is complete rather than looking at an inspection report as a reason to back out of the deal.
Seek Out Professional Guidance
There are many advantages to selling a home for cash, but there can be a few pitfalls as well. One of the more important points to note is that the sale price of the home is likely going to be less than what the home would sell for if a real estate agent was hired and the more traditional approach was taken. Real estate agents are also going to take a five to seven percent commission fee, and as noted earlier, sellers aren’t going to put a ton of money into the home because most would be purchased “as is” in an all cash sale.
Like any other financial sector, there can be people out there looking to take advantage of a home sale situation. Doing some homework on the market value of the home, and getting an appraisal done can help sellers put themselves in a position to price the home in the correct range. It is very possible in this digital age to do some home comparisons beyond what an appraisal will show to really hone in on what the fair market value for a home is. Pricing a home appropriately will help to weed out some of the people that might be looking to swoop in with a low ball offer.
When it comes time to get serious about the sale of the home, like when a good offer has been made, it may be necessary to enlist the help of some professionals in the real estate field. This can happen through real estate agents that are willing to do some quick sale work where they would charge a flat fee to help with the paperwork needed to complete the deal. They can also help to verify that the buyer actually has the funds available before proceeding any further. There are also companies that offer help from real estate experts in an online format that can guide a seller through the process.
Certain situations arise in life that may require the quick sale of a home. When this happens, looking for investors that are going to pay cash for the home is the quickest way to complete the home selling process. All cash deals avoid the typical roadblocks of financing falling through or a contingency clause that allows a buyer to back out. All cash sales can also close much more quickly because there isn’t a bank loan involved and all the paperwork that comes with it. Traditional home sales require hiring a real estate agent and paying that agent a commission to sell the home. Traditional home sales, more often than not, also require some home improvements to be made which is more money out of pocket for the seller. When homes are sold for cash, both of these costly items are removed.
For a successful all cash sale of a home, it is recommended to have an appraisal done along with some market research to establish a reasonable listing price. When a cash offer is made, it is advisable to get some proof that the funds are actually available before proceeding. This is typically a notarized letter from the buyer’s bank or money manager.