Benefits of Selling a House for Cash
Your house is on the market and you're eagerly waiting for a buyer. Your phone rings and it's a prospective buyer with a cash offer! There's a catch though: it's lower than your asking price. However, there's the promise of a quick and guaranteed sale.
Should you readily accept, or should you wait for a better offer to come along?
In this article, we'll explore the benefits of accepting a cash offer for your home and why it would make sense given your financial situation so you can make an informed decision.
Why Are Cash Sales Attractive to Home Buyers?
As much as 34% of home buyers in early 2022 are cash buyers, a number that is steadily climbing according to ATTOM, a real estate data company. Even a majority of condo sales are paid for in cash! This is in spite of plentiful advice written to the contrary, where you're better off investing your money in other financial instruments and financing the home purchase.
Therefore, it's natural to wonder why cash sales would be an attractive path to home ownership.
Here are some reasons why buyers would choose to pay cash for their home:
They Have More Security
Cash home buyers own the home outright. Should something happen in the future that would render them unable to meet their mortgage loan payments, they don't have to worry about losing possession of their home.
They Get Instant Equity
In a financed home purchase, it takes a while to build up significant equity since most of your initial payments go towards interest.
For a vast majority of homeowners with 30-year mortgage loans, it typically takes up to 10 years of consistent payments before having enough equity. This equity is useful as you can leverage it to pay for upgrades which can increase your property's value. Moreover, in worst case scenarios, you can borrow against it to get out of financial difficulties.
In a cash sale, the entire cost of the home purchase is already the equity--no need to wait for decades for it to add up.
They Aren’t Restricted to Purchasing Certain Types of Properties
Lenders have conditions that borrowers have to comply with before they'd agree to finance the loan, such as the house in question being in good working condition. Other government lenders, such as the United States Department of Agriculture, require a borrower to purchase property in rural areas.
Cash buyers aren't bound by these restrictions. Without mortgage lender requirements to satisfy, they can buy properties in any location and condition of their choosing. This allows them to make an all cash offer for a house in terrible shape, fix it up, and sell it for a profit after.
They Have an Advantage in Negotiations
In a hot market, more opportunities are open to those with a cash offer.
Plenty of sellers, especially those in a rush, would jump at the opportunity to have a truncated home selling process with cash buyers.
They Need to Move Quickly
Prospective homeowners who offer cash are usually prioritized by sellers over other buyers. This allows them to finalize the home sale more quickly, allowing them to move into the property as soon as the money changes hands.
They Save Time
Motivated sellers, especially those who are currently holding problem properties, are looking to unload them as fast as possible.
With a cash offer, closing on a property can be done in a week.
Contrast that with an average of 4 months for a traditional approach, we have a clear winner with regards to time saved.
They Save Money in the Long Run
A key advantage in cash purchases is eliminating the need to pay interest. According to the Consumer Financial Protection Bureau, the interest paid over the life of a mortgage loan can be as much as much as the amount borrowed itself.
For example, although a house might have a purchase price of $100,000, you may find that the total interest needed to be paid is also $100,000 over the loan term--and this is on top of other fees that a lender may charge you upfront such as loan origination fees, and appraisal fees.
End result? A staggering loan amount more than the actual price tag for the home.
Furthermore, many cash buyers want the peace of mind associated with having a property that is paid for, insulated from market fluctuations.
They Find It Easier to Sell the Property Later On
Since the house is not leveraged, it is much easier to unload, should the new owners change their mind some time in the future.
Advantages of Selling Your Home to Cash Buyers
No Need for Inspections
In a traditional home sale, a pre listing inspection is a must before you put it on the market for sale. There's no one stopping the potential buyers from doing their own due diligence, which includes an inspection, and when they find a problem, they can use it as a bargaining tool in the negotiations. However, it also means spending around $500 upfront just to find out about possible problems, and if you're in a financial pickle, you might not be able to afford this, let alone the repairs.
Is there a way to skip this? Absolutely.
An inspection is not required when getting cash offers from "we buy houses" companies or a real estate investment company. Usually, all the information that's required of you is the property address and your contact details.
No Need for a Home Appraisal
As part of the underwriting process, mortgage lenders also require home appraisals in order to find out the market value of your home. This will also be the basis of the loan amount and the monthly mortgage payment for financed buyers.
An appraisal is a stressful process for both the buyer and the home seller. Most lenders conduct a review of the buyer's finances, and if their credit score isn't looking too good, they might not agree to finance the loan, leaving you in the lurch without a buyer.
Fortunately, with a cash sale, there's no need to have a mortgage lender involved. That means appraisal is not required. Real estate investors are familiar with local market conditions and property values so they know how much cash to offer you for your property.
Sure, their cash offers tend to be below market value, but that's just because contingencies for completing repairs are already factored in. In line with this, it is recommended that you go ahead and look at comparable sales to do market research on your own to make sure that you won't be accepting lowball cash offers.
No Need to Spend Upfront on Repairs
In a traditional sale, inspection is usually a lender requirement.
This inspection would likely turn up multiple issues requiring your attention and money to resolve. As an added blow, shopping around for contractors, vetting them, and hiring them to do the actual repairs take time and effort--a no-no if you're looking to sell quickly. You'd want to just pass them on to a buyer. However, if your potential buyer is a first time home owner, they'd almost certainly balk at the prospect.
On the other hand, by accepting a cash offer from a real estate investor or house flipper frees you up from having to deal with both minor and major repairs and upgrades.
No Need for Showings
Skip the additional expense of staging your home for open houses and walkthroughs. When selling to a cash buyer, they'd likely renovate anyway, so might as well leave everything as is.
No Need to Pay Commissions and Extra Fees Associated With the Sale
An all cash buyer deals directly with you, the seller, foregoing the need for an intermediary, helping you save up to 6% in real estate agent commissions. Some cash buyers even cover closing costs so you won't have to, and you get everything in their cash offers.
Faster Closing Period
If you suddenly need to move out of state, a fast cash sale saves you plenty of time from waiting around for a buyer. Even if you could potentially sell for a higher price if you choose the traditional approach, the certainty and swiftness of cash sales ensures you come out ahead.
Provides a Way Out of Challenging Situations
If you find yourself in a bind because of the following, accepting a cash offer for your home can instantly turn things around.
Foreclosure: Your home is headed for the auction block, and any minute now, you might get that eviction notice. To save yourself the trauma of having your home repossessed, accepting a cash offer for your home might just the out you desperately need.
Divorce: Your marriage has gone sour and you're looking for a quick resolution to your divorce settlement. Selling to a cash buyer can make it easier for you and your ex to divvy up the sale proceeds, allowing you both to move forward as soon as possible.
Expensive Repairs: Many homeowners would rather accept a hit on their home's sale price when selling for cash than continually sink cash for repairs in what is proving to be a money pit.
Sudden need to move: Got a sudden job opportunity in another state that you absolutely cannot pass up? Accepting a cash offer for your home allows you to move quickly. Proceeds from the home sale is usually more than enough for a down payment on your new place.
Selling Your House for Cash Means Cost Savings
When preparing to sell your house the traditional way, there are lots of things you have to do first, and everything comes at a price. For instance:
- Home inspection: up to $500
- Appraisal: between $600-$2,000
- Homeowners insurance: around $1,800 annually
- Cleaning and decluttering: between $130-$450
- Staging: between $5,000-$6,000 for a two-month contract
Assuming everything is in order and you won't need to do any major repairs, doing all of the above can already set you back around $10,000. However, if the inspection turns up an awful lot of problems such as foundation issues or a failing septic system, expect to shell out tens of thousands more. A good real estate agent can possibly sell your house above its asking price so you'd be able to recoup all that upfront investment, but still, there's no guarantee.
Money that stays in your pocket is money saved, and selling your house for cash spares you from the hassle of arranging and paying for inspections and all other prep work associated with a traditional home selling procedure.
Final Thoughts: Selling Your Home for Cash
Skip the stagings, showings, negotiations, and the uncertain wait for buyer financing which drags out the process in a traditional sale. If you want to significantly whittle down the time and expense needed for the closing and paperwork process, then sell your house for cash here at House Buyer Network!
When you decide to work with us, we instantly connect you with our chain of buyers across the country. And since you're dealing directly with a buyer, you don't have to pay commissions to real estate agents. We also close fast, and you can have the cash in your bank account in as little as 7 days! We even cover all closing costs so you're guaranteed to get everything our buyer offers.
Bottom line? Selling for cash to us means saving money, time, effort!
To get started, just fill in our form below with your address, email, and phone number, and expect a call with our fair, all cash offer within 24 hours.
If you have any questions, don't hesitate to call us at (855) 835-2544!
