When it’s time to sell your house there are many things to consider. Where will I move to? What’s a fair price for my house? Should I hire a real estate agent? These are all great questions but one thing that not many people stop and think about is: Should I sell my house for cash or conventionally?
What Does It Mean To Sell My House For Cash?
Essentially there are 2 main types of buyers for real estate. There are Cash Buyers and there are Traditional Buyers.
A buyer who is using all cash to purchase a piece of real estate has much more flexibility with their spending compared to a buyer who is using any other form of financing to purchase the property, such as the Traditional buyer who will most likely use a conventional form of financing.
Cash buyers DO NOT live in the property. The sole purpose of buying the property for cash buyers is to repair the property and either resale it on the market or to rent it out. The cash buyer is typically an expert in their field, so they do not need to pay a realtor to represent them. Since the homeowner is not represented by a realtor, that is why there are no realtor fees or junk commissions deducted from the sales price at closing. An offer from a cash buyer is typically what you net, before paying off the mortgage, considering the cash buyer offers to pay all closing costs associated with the sale. Time is of the essence for these buyers and they can typically close within 7 – 21 days, creating flexibility for the homeowner. THIS COULD SAVE YOU THOUSANDS OF DOLLARS AND A LOT OF TIME.
The traditional method of purchasing real estate typically requires a conventional form of financing, usually from a local bank, to provide a loan to the home buyer so they can afford to purchase the property. Since the bank, in this case, is taking a risk by lending the money to the homeowners, they require strict inspections, appraisals, and a survey before they will approve the loan.
This can take a long time. That is why it usually takes longer than 5 or 6 weeks for the bank to do their due diligence and approve the loan to the home buyer. The main purpose of purchasing the property for a traditional buyer is to live in it. Traditional home buyers typically aren’t experts in the field of real estate and hire a realtor to represent their best interest in finding a property to live in and to negotiate the price. This automatically creates a fee that needs to be paid.
Typically, the realtor will require a 3% commission, whether they are the listing agent representing the seller or the buyer’s agent representing the buyer. Since there is usually a listing agent representing the seller in the traditional sale so they can market the property on the MLS to create exposure, another 3% commission must be paid. THAT’S 6% JUST TO PAY THE AGENTS. Whether the buyer or the seller has to assume the cost, it still makes it tougher on both sides of the transaction to eventually agree to terms and price.
Why Should I Sell My House For Cash?
When it comes time to sell your home there are so many options to choose from. You can hire an agent, you can sell FSBO (For Sale By Owner), you can owner finance, the possibilities are endless. But by far the fastest and easiest way to sell is selling for cash. Here are some reasons why.
1. NO CLOSING COST With Cash Sales.
Generally when you sell your home to a cash investor the investor will take care of any closing costs because they want to make the process as easy for you as possible. Also since there are no real estate agents involved there will not be a 6% agent fee. This will put more money in your pocket at closing.
2. CLOSE QUICK + ON YOUR SCHEDULE.
When selling your home for cash investors are usually very motivated to close as quickly as possible. So if you need to get out in a hurry this can be very helpful. But on the other hand, if you need more time in the home most investors will be more than happy to accommodate.
3. CASH FOR AS-IS HOMES
When you use a conventional method to sell your home, lenders usually require all kinds of home inspections and appraisals. When these inspectors go through your home they will put together a long list of items that you need to repair before closing. But not with investors, they will buy your house as-is so you don’t have to worry about making repairs to the property before closing.
4. NO OPEN HOUSE
When you are selling to an investor there is no showings or open houses, no rushing to clean the house before people show up, and no need to leave your home for long periods of time during an open house. This all just makes the process of selling your home that much easier.
These are just a few good reasons to sell your house for cash. It’s no wonder why according to the National Association of Realtors 32% of all residential homes sold are cash sales.
When Should I Sell My House For Cash vs Traditional?
The differences between selling for CASH and selling Conventionally are described below:
CASH VS. CONVENTIONAL Home Sale – Contractual Terms Comparison
|TIME TO CLOSE||7 – 21 Days (MAYBE SOONER)||30 – 45 Days|
|REALTOR FEES||N/A||6% of Sale Price|
|CLOSING COSTS||$0||1% – 2 % of Sale Price|
|CONCESSIONS||NONE||1% – 2 % of Sale Price|
So those are the differences…. Which one is better for you?
A homeowner must first make an honest assessment with themselves as to what their goals are for selling and what the condition of their property is in. Here’s a scenario:
Person A – He lost his job 3 months ago. He has missed his last 4 mortgage payments and the bank is giving him less than 30 days to repay his missed payment and the current month’s payment. Time is of the essence. If he does not make his next payment or the previous payments, then he will go into foreclosure. He has lived in his home for 15 years; he has not done any updates or replaced any major components such as the HVAC or the roof. The foundation is cracking and is severely uneven. Some holes in the wall. Just a worn-out house, not run down, just needs a few major components worked on or replaced and some cosmetic TLC.
Person B – She purchased her current home 2 years ago. She bought the property at the near top of market value. Rightfully so, since in this case, the property was completely up to the market standards. She needs to move from Dallas, Texas to Miami, Florida to be closer to family. She is not under the gun to sell her home but would still be interested in selling as soon as possible. She expects to sell her home near the top of current market value, most likely more for what she bought it for, due to appreciation.
These two people, Person A and Person B would both have completely different goals and expectations in mind that would need to be met to be able to successfully sell their home and transition to the next chapter in their lives.
When asking themselves some crucial questions regarding the sale of their home, they may have different answers which would pertain to the type of buyer they sold to.
|QUESTION||PERSON A||PERSON B|
|When do I need to sell my property?||Less than 30 Days to avoid foreclosure||Soon, but no rush. Could be 60 days and that’s no problem with her|
|Is my property in the TOP market condition for 2019?||NO||YES|
|Do I expect the top of the potential market value for my home?||NO||YES|
|How much will repairs on the home cost?||$30,000||$0|
|What is the potential market value for my home when it is all fixed up to match market standards?||$100,000||$100,000|
|How much do I expect to sell my home for? What is a FAIR OFFER?||$50,000||$100,000|
Woah Woah Woah… wait… Why is my home only for $50,000 if the potential value is $100,000 after putting in $30,000 worth of repairs and updates? Read more on “What is a fair cash offer for my home?”
Essentially, since the home needs significant repairs and there are many risks associated with repairing homes, the CASH BUYER, who is most likely an investor, will need to purchase the home at a discount for it to make any sort of financial sense. Even if the cash buyer was not an investor and wanted to live there, the house would still be worth $50,000 to the conventional buyer, generally speaking.
No one would take on a risk by paying the difference in the price of the home from the repair cost without any spread because it doesn’t leave any sort of value for whoever purchases that home compared to what they’re risking, which is their time and money. They would be better off purchasing a market-ready home at market value and assume no risk. Make sense?
Think about it.
If the cash buyer were to some reason pay $70,000 for the property described, they wouldn’t make any money at all if they put $30,000 worth of work into it and sold at $100,000, In fact, the investor would lose money because of having to pay closing costs and realtor fees. So, it does make sense to leave some money on the table for the investor to account for their costs.
After considering the two different types of buyers, CASH and Conventional? Which form of home sale would make the most sense?
Person A would benefit most from selling the home to a CASH BUYER who is most likely a real estate investor or a buyer who would live in the home. Nonetheless, an investor of some sort.
Since the cash buyer can close quickly with little to no contingencies, this can help solve the problems that Person A had, which was to sell his home in less than 30 days to catch up on late mortgage payments to avoid foreclosure. PROBLEM SOLVED.
Person B would benefit most from selling the home Conventional. Most likely selling to a buyer who is working with a real estate agent to assist them in finding a home for them to live in. Conventional buyers would most likely use a conventional form of financing, from the bank, to purchase the home, which is why closing would take about 45 days and requires appraisals, surveys, possible concessions, a lot of time, etc. Remember Person B was in no immediate rush to sell, so having the closing process take 45 days or so would be no issue to her. PROBLEM SOLVED.
Which one is the best though?
There isn’t a better one if you’re directly comparing it to the other. IT ALL DEPENDS ON THE GOALS AND NEEDS OF THE SELLER AS WELL AS THE CONDITION OF THE PROPERTY. Everyone is different and so are their homes. By being honest and transparent with yourself, as a homeowner, you will get the best insight as to which type of home sale is the best for your situation.
Still unsure? Think about it a little differently…
Make up a random scenario or put yourself in the shoes of someone you know and compare it to the information provided above, you’ll quickly get a good sense of which type of home sale would be best.
Who Will Buy My House For Cash?
So if selling for cash seems like a good fit for you the question becomes: Who will buy my house for cash?
No matter what area you’re in there will be cash investors who are actively trying to purchase property. But finding the right investor is just as important as anything else. You need to make sure the investor that you choose to sell to is trustworthy and not trying to rip you off.
If you are in the Dallas/Fort Worth area and want to sell your house for cash Savvi Buys Houses is the company to go with. The process is simple, just call in and give a little information about your property. We’ll set up a time to come and see the house.
While at the house our agents will take 100 high-definition photos of your home as well as giving you a fair written, no-obligation cash offer. If you decline the offer you can keep the photos to market the property on your own.
If you accept the offer we will close at a local reputable title company. You can get cash in your hand in as little as seven days. If you need a bit more time, no problem we can schedule the close date as late as you need.