Is Getting a Cash Offer a Good Idea?
So, you’ve decided to sell your house and get cash
That’s a smart choice and one that comes with many benefits. No repairs. No appraisals. No contingencies. No stress. Fast closing process…what’s not to like?
To many people, selling a house for cash is somewhat of a new phenomenon that may seem too good to be true. The fact is, the real estate industry has evolved over the years, and sellers are now opting for cash buyers over other offers.
According to a recent Redfin report, nearly 30% of US home purchases this year were paid in cash, up from 25.3% last year.
Which brings us to the question; why are cash sales gaining so much traction?
In this post, we’ll cover everything you need to know about selling a house for cash, including how to get cash for your house and how to find cash buyers.
What Is a Cash Offer on a House?
When you hear the term “cash offer,” you might picture a wealthy buyer showing up at the negotiation table with a briefcase full of hundred-dollar bills, ready to pay and gain immediate ownership of the property.
While such scenarios are common in movies, in reality, buying a house for cash isn’t this dramatic. In fact, it’s illegal to close a real estate deal using physical cash in the US.
So, what does it mean to get cash for your house?
A cash offer is an all-cash bid on the property. Simply put, you find the property you want and then submit an offer to purchase it outright without a mortgage loan or other financing.
Cash offer is more attractive to sellers as they attract fast home offers with no contingencies, and low sales fall through risk. And the catch? You won’t sell it for top dollar, but you’ll get a fair price depending on your home’s condition.
How Does a Cash Offer on a House Work?
Selling a house for cash is a straightforward process. Here’s what happens when you try to get a cash offer and choose selling a house to a cash buyer.
1. Request a Cash Offer
You skip the staging and other preliminary processes and go straight to requesting an offer. Most cash buyers buy the property “as is”—in its current state with no need for repair and renovations. However, you can communicate with the buyer if you’re open to making repairs.
2. House Is Evaluated
The buyer or his representative will arrange the time to view the property. They will estimate the value of the property and decide on the price they are willing to pay.
3. Review of Contract
The seller will then review the offer, including the contract price and terms, and decide whether to sign it.
4. Verify Proof of Funds
Since the buyer is using their own money to pay for the property, you’ll want to ensure they actually have the funds.
Typically, you’ll ask for earnest money upfront and ask for other proof of money, such as bank statements and written endorsement from the buyer’s bank. This assures you that the buyer has ready funds to complete a transaction of this size.
5. Pass the Home Inspections
In most cases, the seller will sell the house “as is.”
However, the buyer can still request inspections and repairs based on their findings or renegotiate the agreed-upon price.
6. Obtain Title Report
The buyer will want to see the title report before the final closing to ensure the property is free from liens and encumbrances. The title also verifies that the seller is the rightful owner of the property and has the right to sell the property.
7. You get Paid
The buyer will put the remainder of the cash into the escrow account. The funds will be given to the seller at closing, and the ownership (in the form of title deed) transferred to the buyer.
If you have liquid cash to purchase the property outright, the sale can close quickly—often in a matter of days.
How Is Cash Offer Different from Other Offers?
There are a couple of notable differences between cash offer and regular (mortgage-based) offers. These include:
Cash Offer Have Fewer Contingencies
Cash offer or rather cash sales usually involve fewer contingencies. Buyers don’t need the:
- Financing contingency (this applies to mortgages)
- Sale contingency
- Inspection contingency
Some buyers may still want an inspection contingency, but this contingency is not mandatory, unlike regular offers. Fewer contingencies in the cash offer lead to a faster closing time and a more streamlined sale.
Cash Offer Closing Process Is Faster and Simpler
In the usual market, it takes an average of 30 days to get a mortgage.
The process can take longer if there are problems with your application. According to Ellie Mae Origination Insight Report, it takes an average of 45 days to close on a home purchase.
In contrast, cash offer don’t go through the lengthy mortgage application process. If the buyer has liquid cash, the deal can be closed in a matter of days.
Cash Sales Have Lower Costs
The costs associated with cash sales are significantly lower compared to the cost of regular offers. In a traditional sale, the buyer has to pay costly bank-related fees, including origination fees, loan processing fees, credit check costs, etc.
Add the mortgage interests to the equation, and you’ll get a clearer picture of how costly traditional offers can get. With cash sales, you don’t pay any of these costs, and this could lead to significant savings over time.
Cash Buyers Need to Show Proof of Funds
Although not quite as complicated as applying for a mortgage, cash buyers may also need a financial institution to help make their offers stick.
A buyer will require a financial institution to verify the documentation showing proof of funds. In contrast, regular offers may not require proof of funds but will, in most cases, require a mortgage approval letter.
Cash Offer Don’t Need an Appraisal
Lenders require a home appraisal to ensure the property is worth as much as they’re being asked to finance, and this helps to reduce their financial risk in the event of a foreclosure. Cash offer, on the other hand, don’t involve lenders, so no appraisals are required.
Are Cash for Home Companies Legit?
The simple answer is Yes.
Many legit companies exist that will buy your house for cash, provide a great experience, and deposit money in your bank within days.
However, it’s advisable to exercise due diligence when dealing with “we buy houses for cash companies.” While many property buying companies operate legally and provide exemplary services, others see an opportunity in desperation.
That said, it’s easy to fall for a scammer’s trap if you’re not cautious.
Beyond a cut in sales price, you stand to lose more from opting for a quick cash sale from an unvetted buyer. To avoid this, here’s what you should do as part of your due diligence.
1. Request Proof of Funds
Ask for proof of funds from the buyer’s bank affirming that the buyer can provide adequate earnest money—the deposit representing a buyer’s commitment to a sale.
In most cases, a cash buyer will deposit 2-3% of the purchase price in earnest money, but the amount can be higher depending on the agreement. The buyer will need to produce a document endorsed by their bank to verify that the money is available.
Typical documentation to produce may include:
- An original bank statement
- A copy of the money market account balance
- A certified financial statement
- Proof of funds letter
A legit buyer should have no problem providing proof of funds.
2. Ensure they are Accredited
When shortlisting cash buyers, check those accredited by reputable agencies such as the Better Business Bureau (BBB).
Accreditation by a nationally recognized body is an indication of a good track record and makes a company more trustworthy. Visit the company’s Better Business Bureau profile and check for positive reviews and timely responses.
A reputable company should have at least a 4-star rating from more than one hundred customer reviews. Avoid working with any company that is not BBB accredited.
3. Contact References
References can also help you learn about the cash buyer’s company.
Ask to speak to the cash buyer’s title company to learn about the company’s values, experience, and reputation. You could also ask them to give you the last address of the house they bought to get more insights into the type of houses they buy and their pricing.
How Can You Find a Cash Buyer?
There are plenty of methods for finding cash buyers for real estate deals.
You could utilize Craigslist, check Cash Buyers List, network offline, leverage real estate auctions, or even seek insights from a real estate agent. However, the quickest and easiest way to find cash buyers for your house is on the internet.
Simply type “selling a house for cash”, “legitimate cash buyers near me” or “legitimate cash buyers + your location,” and Google will show you results for active cash buyers near you.
Ready to Get Cash for Your House?
As you can see, there are plenty of benefits that come with selling a house for cash.
If you’re looking for a legitimate cash buyer in Arizona, look no further than Mrs. Property Solutions. We are a BBB accredited company with good ratings and positive customer reviews around our property buying services.
Reach out to us today for more information and find out how working with a professional cash buyer in Arizona will benefit you. Get a cash offer in just a few clicks! Selling a house have never been this easy!