Accepting a Cash Offer. Is it Right for You?
There are many advantages of accepting a cash offer from a potential buyer of your home. You can save an enormous amount of time, money, and also enjoy the certainty of a quick closing. According to the National Association of Realtors, 16% of all residential sales are sold for cash.
Money
On a cash sales transaction, you will not have to pay realtor fees, closing costs, any upfront expenses for home renovation, and staging costs for your home. Real estate commissions range from 5% to 6%, closings costs in the DMV range from 2% to 4%, and renovation costs can range from $10,000 to $50,000 depending on the scope of renovation. You can see that selling a house is expensive.
Time
Another advantage of working with a reliable, experienced cash buyer is the value of time. A traditional home sale can take 90 to 120 days to complete in a good market and that does not take into account the time to renovate and prepare your house for sale. Most cash buyers, if they are legitimate, can close the deal on your timeframe and in many cases in little in as 10 days.
Certainty
Finally, a cash buyer brings a level of certainty to the process. There are no home inspections, appraisals, or last-minute financing snafus that can derail the settlement and cause the whole process to begin anew.
Taking into account the many advantages of a cash sale, more sellers are turning to this reliable and efficient way to sell their homes.
Let’s look at the Flip Side. What are Drawbacks of Selling a House for Cash?
Lower Offer Price
Most cash sales will result in a lower offer price for your home. After taking into account the expense of selling your home traditionally and the cost equivalent for time and hassle, it may not be a lower net price. Ultimately, the net price is the number you should focus on from the sale of your house.
Home Buying Scams
You have received letters, seen TV commercials and ads, and have witnessed road signs from We BUY Houses companies. Although, many are legitimate, there are a few bad apples out there preying on people’s circumstances. They are not qualified, have no capital, and are attempting to secure a contract against your home only to flip it to another investor. A parade of contractors, investors, and inspectors will invade your home to find the highest flip fee for the investor. Unfortunately, if no buyer is identified, the original investor will cancel the contract and you are back to square one with no legitimate buyer. If the flip is successful, the investor will make a quick $15,000 to $20,000 or more on the flip. The money made by flipping the contract on your house should be cash in your pocket and not in their pocket.
Beware of Scams
Selling your home off-market may be the best option for you. If the property requires extensive renovation, or you need to sell faster than the traditional method, it is reasonable to explore selling your house for cash. There are a number of legitimate companies that buy houses off-market, but I have witnessed more and more fly by night companies and individuals with little or no experience wasting time and in some instances committing fraud.
No Upfront fees
Do not under any circumstance pay an individual or company an upfront fee. All expenses or fees to either party will be exchanged at closing. There should be no fees for viewing your home, writing a contract, or anything else.
Verify Capital
Many investors will claim they can close on the house quickly and pay all cash. Before signing a sales contract, it would be wise to ask for verification of funds. You want to make sure the investor will perform on the contract and your home is sold in a timely fashion. If the investor hesitates or balks at this request, it may be a red flag on their ability to perform
No living Room Closes
After both parties agree on the terms of the sale, a written sales contract should be signed by both parties. You should receive a copy of the contract for your records. A closing date should be established, and both parties should meet with a title attorney to conclude the sale. At closing, you will receive any proceeds due from the sale of your home. Do not allow the scammers to convince you to conduct closing at your dining room table without a title attorney present. This living room close is a red flag that can lead to potential headaches.
Tie up your House and Flip the Contract
One common tactic, although it is not illegal, short changes the seller from receiving the highest and best offer for their home. The investor negotiates hard and convinces the seller to sign a contract. Upon signing, the investor shops the contract to other investors and assigns the contract to another investor for a fee. The fees can vary, but can be in excess of $20,000 in some cases. My belief is that you should receive that equity from the sale of your home.
Off-Market Purchases
The process of working with an off-market buyer should be transparent, simple and result in a hassle-free transaction. A legitimate investor will ask for details about the home, schedule an appointment to view the home in person, and base their offer on the amount of renovation required to bring your house to market.
They will give you time to consider the offer, and there will be no high-pressure sales tactics to sign the contract immediately. You will have time to talk with advisors and family to make the right decision.
You will be working directly with an individual and not just talking on the phone or internet. Ideally, the investor will be a local, dedicated buyer with market knowledge of your neighborhood and surrounding area.
Closing should run smoothly and result in cash in your pocket.
How Much does it Cost to Sell a House?
Selling a house can be a very stressful process for many people. The process involves preparing the home for sale, negotiating the sales price, undergoing inspections and appraisals, packing the contents, and finding a new place to call home. During the process, most sellers encounter hidden costs that can add thousands of dollars that are subtracted from the bottom line. A few of them include higher renovation costs, staging costs, unknown termite damage, and costly repair items discovered during the home inspection. Unfortunately, once you start down the road of selling your house the traditional way, it is hard to turn back. Let’s look at some of the known expenses of selling a house.
Real Estate Commissions
Realtors earn their living by generating commissions by helping both buyers and sellers buy and sell real estate. The commissions are typically 6% of the sales price of the home. If the sales price of the home is $500,000 then a commission of $30,000 will be earned at closing. You can negotiate the commission with your realtor, but most of the realtors charge close to the six percent level. You can save on commissions by selling your home by yourself. If you successfully sell By Owner then you would still owe three percent commission to a realtor if he or she brought the buyer to the sale.
Transfer and Recordation Taxes
A transfer tax is charged by a state or local government to complete a sale of property from one owner to another. The recordation tax is an excise tax imposed by the State for the privilege of recording an instrument in the Land Records. The taxes can add up and depending on which local jurisdiction you live, the taxes can be upwards of 2% of the sales price. This tax is an unavoidable expense that is levied on all sales throughout the country. Each state will have their own tax rate.
Closing Costs
Closing costs include attorney fees, releasing a mortgage, preparing a deed, title insurance, and various other line items on your closing statement. Again, these costs can amount to thousands of dollars required from you in order to sell your home.
Seller Concessions
Depending on the strength of the local market, buyers often ask for closing help in their purchase offer. Closing costs that are credited by the seller can help offset the amount of money required to buy the home. Lenders will allow the seller to credit the buyer up to 6% of the sales price of the home. This amount is a negotiated concession in the sales process and can be avoided all together if you are selling in a hot market.
Holding Costs
Selling a home traditionally can take 90 to 120 to complete the sale. In some markets, the sales cycle can be much longer. During the time the house is on the market, the seller will be required to make mortgage payments. Each month that passes is reducing the amount of monies that you will receive at closing. Holding costs can be especially painful if the house is vacant, and you are not enjoying the benefits of living there. Other expenses during the sales process include utilities, insurance, maintenance, and lawn care.
Taxes
A married couple is allowed to shield up $500,000 of equity from the IRS. If you owned your home and have built up equity, anything over the $500,000 thresh-hold will be taxed. Talk to an accountant about your potential tax liability if you have significant equity in your home and you decide to sell.
Moving Costs
Your home is on the market and you have a closing date scheduled to transfer ownership. You will need to identify a new place to call home. Packing, cleaning, moving, and then unpacking your belongings in your new place can be stressful, time consuming, and expensive. Moving expenses can cost upwards of $10,000 depending on the amount of furniture, belongings, and the distance to your new home.
Traditional Selling is Expensive!
As you can see, selling a home is expensive. If your home needs work or if you need to sell faster than a traditional sales timeframe, you might consider selling the home off market to a cash buyer. Profitable Property has been advising home sellers in this situation for the past 25 years. We will arrange a time to meet with you privately and offer you the best all cash price for your home.
We purchase the house AS-IS, no warranties, and can close on your timeline. Just pack your belongings, leave everything else, lock the door, and collect your profits (CASH) within 10 days.
If we meet with you and determine that an all cash offer is not the best strategy for you or your family, we will help you navigate your options for the best solution to sell your home.