What Are the Advantages
of Selling to a Cash Buyer?
Selling a home can be a long, drawn-out ordeal. For most people, buying and selling real estate is the biggest and
most important decision of their lives, so making sure it is done properly is
important to both parties.
Homes often have to be staged, inspected,
and appraised, not to mention properly marketed, to attract a buyer, and then
the buyer often has to go through a lengthy loan underwriting process to close
on the property. All of that takes both time and money.
Sometimes,
that hassle can be avoided simply by paying cash for the property. Cash buyers
are rare, but they are definitely out there. If you have a property to sell,
using a cash buyer can save a ton of headaches.
What Kind of Home Would
Attract a Cash Buyer
Not every type of home will attract a
cash buyer. A well-kept McMansion in a nice neighborhood, for example, would be
an unlikely candidate for a cash buyer. The types of houses that attract cash
buyers tend to be under some sort of duress or when the seller needs to close
quickly.
Homes
in foreclosure or pre foreclosure are often good candidates for a cash buyer.
In this situation, the home can be closed on quickly and easily, relieving a
ton of stress for the seller. Generally, these homes have maintenance or repair
issues that must be addressed and using a cash buyer will eliminate the need
to pay these expenses.
Estates
often attract cash buyers as well. In these cases, the heirs often want to
close quickly, and a cash buyer can solve that problem for them, especially if
there are also expensive repair or maintenance issues that would need to be
taken care of for a more traditional sale.
Often
the cash buyer is an investor who makes a living by flipping homes for a
profit, and anytime a seller wants to sell quickly and is willing to offer a
discount, a cash buyer will often be the best-case scenario for the seller.
Why Would a Buyer Want
to Pay Cash?
Cash buyers are generally looking to
close quickly and easily as well. Generally, they will know that the home is
not in perfect condition and can quickly estimate repair or rehabilitation
costs close enough to get a good idea of whether or not the property will be a
profitable investment for them.
When the speed and ease of a cash sale
are needed by the seller, they can make their offer much more compelling and
can solve problems for the seller that buyers using traditional lending simply
cannot do. By solving these problems, they can offer a lower purchase price and
still get their offer accepted by the buyer.
Even though the purchase price is
lower, once the real estate agent’s commissions and other fees are cut out, the
sellers often end up netting about the same amount anyway.
Benefits of Accepting an
All Cash Offer
In exchange for accepting a lower
purchase price, the seller does get rewarded in other ways. When a cash buyer
is used, the commissions paid to the buyer’s and seller’s real estate agents
are cut out of the equation. Usually, each agent gets 3% of the purchase price,
so cutting them out is a significant saving.
Instead of using an agent, all that is
needed is an attorney with a real estate license to process the transaction, or
alternatively, it is not unusual for the cash buyer to have a license themself.
In addition to the commissions, other
fees are cut out as well. Appraisals and inspections are generally waived by
the buyer, which can cut expenses.
Properly staging a home for a traditional sale
can be expensive as well. Obviously, expenses such as landscaping, maintenance,
and even photography for the listing are not needed.
Sometimes
when a home has significant maintenance issues, such as problems with the roof
or foundation, a bank will not be able to underwrite a loan at all, and if
funds are not available to make the repairs, a cash buyer will be able to solve
a significant problem for the seller.
The
sales and loan underwriting princess takes time as well. When a home is being
staged, shown, and waiting for the loan to close, which can take months,
expenses such as property taxes, insurance premiums, and utility bills are all
piling up. Simply moving quickly can save thousands of dollars.
If you have been in the real estate business for any length of
time, you are also well aware that accepted offers are never completed until
all the paperwork is signed and the keys are handed over on the closing day.
Deals
fall through all the time for financial or other reasons, and when they do, the
sales process has to start all over again. With a cash buyer, when an offer is
accepted, the property is usually closed on within a couple of days at the
most.
Cash Buyers in This High
Interest Rate Environment
The current financial situation may
make using a cash buyer especially attractive. The housing market is slowing
after an unprecedented number of transactions in the last few years due to
changing needs due to the Covid 19 pandemic.
The economy is slowing, and it is
likely we are headed toward at least a small recession. The Federal Reserve is
raising interest rates, making borrowing money significantly more expensive.
The current environment is not conducive to selling real estate, and the
situation is much more likely to worsen before it gets better.
Cash buyers are likely to become even
more valuable in the coming months. Those selling to cash buyers will avoid the
headaches associated with the real estate sales process, will save on a ton of
expenses, and will be able to move quickly and eliminate the possibility of a
deal falling through at the last minute.
If you have a home to sell, it may be
wise to consider a cash buyer in order to move quickly and cut out unnecessary
expenses.
