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What Is a Cash Offer on a House?

September 3, 2020 | Lindsay Frankel Lindsay Frankel

You may have heard of cash offers. What is a cash offer on a house? Here’s how they work and how you can benefit.

A cash offer is an offer to purchase real estate without financing such as a mortgage. Cash buyers offer the total cost of your property in cash, which can simplify the selling process and allow you to close much faster. 

Cash offers are more common than you might think. 16% of residential homes are purchased with cash, according to the National Association of Realtors. There are two common situations in which a seller might receive a cash offer:

  • A buyer makes an all-cash offer on a home that is listed on the market
  • An investor or individual offers to buy a home “off-market” for cash

 

While there are benefits to both types of cash offers for sellers, only an off-market sale eliminates many of the fees that sellers typically incur. 

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Here’s what you need to know. 

The benefits of selling your house for cash

You can close lightning-fast.

Underwriting a mortgage loan takes time. If you accept a cash offer, you may be able to close in as little as a week. Compare that to an average closing time of 47 days for offers with traditional financing. FHA loans and other special programs can take even longer due to stricter requirements. If you need to move quickly, a cash offer is definitely the way to go. 

Read more: How to Pick a Buyer When You Need to Sell a House Fast

There’s less risk of financing hiccups. 

There’s always a chance that the buyer’s financing will fall through, even if they pre-qualify for a mortgage loan. If that happens, you’ll have wasted a month or more waiting for the closing process to finalize. With a cash offer, there’s less risk that the deal will fall through, so you can confidently move forward with selling your home. 

Related: 8 Reasons Pending Home Sales Fail

There are fewer fees.

A cash buyer doesn’t have to pay origination fees or other loan-related charges, and a cash offer can be less costly for the seller as well. Depending on where the cash offer comes from, you may not need to involve a realtor, which means you’ll save on commission fees. Real estate agent fees can cost you up to 6% of your home’s sale price. Similarly, cash offers to buy a house “as is” don’t require repairs or staging, which can save you a significant chunk of change. 

Related: How Much Does It Cost to Sell a House?

How to get a cash offer

Cash offers can come from several types of cash homebuyers, including:

  • Investors: It’s possible that an individual or a business known as an Equity Purchasing Company will see your home as an attractive investment and make an all-cash offer. This is especially common with distressed properties. In 2019, 56% of flipped homes were bought with all cash. 
  • iBuyers: iBuyers are real estate companies that use an online platform to estimate the value of a property and purchase it directly from the seller. They allow sellers to avoid the listing process and associated fees, but in exchange for that convenience, sellers typically need to accept a lower price. 
  • Individuals: In some cases, you might find a buyer who doesn’t need to take out a mortgage to purchase your home. They’ll make a cash offer to avoid financing charges. It could be because they’re wealthy or because they have enough cash from the sale of their previous home. Many retirees also prefer to use their retirement nest egg rather than taking out a loan. 
  • Sundae: Like a cash offer from an iBuyer, Sundae provides you with the opportunity to skip the listing process. But Sundae is different from an iBuyer in several key ways. We send out a Market Expert to thoroughly evaluate your home, so the price we offer is the price you’ll get, and you won’t pay any fees. And while iBuyers often reject the most aging, distressed homes, Sundae has a soft spot for homes that need extra TLC. 

 

Also consider: Is Sundae Right for You?

What to watch out for

When selling a home for cash to an individual or real estate company, you’ll need to watch out for real estate scams. Without a lender to thoroughly vet the buyer, you may want to ask for references yourself. If you’re working with a company, do your research to make sure the company is legitimate. 

It’s also important to get proof of funds, said Kelly Baca, Broker Associate for Coldwell Banker. “You want to make sure the buyer really truly does have the money to pay cash at closing.” She’s also seen buyers give a cash offer and later decide to get a loan. 

When it comes time to complete the transaction, be suspicious of overpayments, since these are a common scam tactic in cash-only sales. The scammer will send you a forged check and ask you to return some of the money before you realize you’ve been defrauded. 

If working with an iBuyer, beware of fees that could reduce the amount of your offer. Research shows that sellers who accept an offer from an iBuyer end up paying 13% to 15% of their home’s sale price in fees, more than double the cost of listing with an agent. 

Finally, keep in mind that you probably won’t get your top asking price with an all-cash offer, especially from an iBuyer or an investor who intends to fix and flip your home. Baca said individuals offering cash also tend to offer a lower price. At Sundae, our goal is to give sellers a fair price. But most cash buyers are interested in getting the best deal or making the most profit. 

Further reading: How to Avoid We Buy Houses Scams

Get a cash offer today

If you need to move quickly and want to skip the hassle of listing your home, a cash offer could be the ideal route for you. But you should beware of scams, low offers, and hidden fees. For a quick and painless sale at a fair price, request a visit from one of Sundae’s Market Experts. They’ll be able to offer you a competitive price for your home that you can rely on, without worrying about extra charges. 

Get a cash offer from Sundae today.

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