As-Is Cash Buyer: What You Need to Know Before Selling Your Home
An as-is cash buyer offers are not always as solid as it seems. Even though the buyer is paying cash for the house, a cash offer can still fall through.
5 Reasons Cash Offers Fall Through
- Title: One problem is unclear titles. Cash offers close quickly so an unclear title might stop the deal if the title research takes too long.
- Unpaid Taxes: This will show up during closing and will bring the sale to a complete halt. Cash buyers need to close on time so getting the taxes paid and cleared off the title would most likely take too long.
- Inspections: Cash offers can fall through if the buyer is not able to get the necessary inspections done on the property. If the buyer is not able to get the necessary inspections done, the offer will likely fall through.
- Closing Costs: New cash buyers have the cash for the house, but might not know the extent of the closing costs. Ask your potential buyers what they expect to pay for closing costs.
- Tenants: Tenants have rights and they need to be treated fairly during a home sale. If the seller has not fully prepared the tenants for the sale, they can bring the process to a halt. Be cautious when buying a house with existing tenants.
What is an As-Is Cash Offer
An as-is cash offer is an offer to buy a house for 100% cash sold “as-is”. The seller doesn’t need to make any repairs or improvements to the house.
If there are any issues with the house, the buyer is responsible for fixing them.
But the house is sold at a lower price than a conventional sale. The buyer makes an offer that reduces the selling price so that repairs can be made and the house can be sold for a profit. Typically the offer is about 70% of the value of the house once it’s been renovated.
Advantages of Selling Your House to an As-Is Cash Buyer
One of the main advantages of selling your house as-is is that you don’t have to make any repairs or do renovations before putting it on the market. This can save you a lot of time and money, as well as the hassle of working with contractors and paying money upfront before the sale of your house.
Additionally, selling your house as-is to a cash buyer can help you sell it faster since potential buyers won’t have to wait for repairs to be completed before they can move in. This is especially beneficial if you’re selling in a hot market or if you need to sell quickly for any other reason.
Another advantage of selling your house as-is to a cash buyer is that it can help you avoid costly real estate commissions. When you list your house with a real estate agent, they typically take a commission of around 5-6%. However, if you sell your house as-is, you can avoid paying this commission altogether.
This can save you thousands of dollars, which is a big benefit, especially if you are in a slow market.
Finally, selling your house as-is can give you more control over the sale. When you list your house with an agent, they will be in charge of marketing your property, negotiating with buyers, and handling all of the paperwork.
However, if you sell your house as-is to a cash buyer, there’s no need for marketing your property. You negotiate with the buyer and a title company or real estate attorney handles all of the paperwork.
What Is a Buy and Hold Real Estate Investor – Are they As-Is Cash Buyer?
A buy-and-hold investor buys houses and then holds onto them, either for the rental value as a return on their investment or for appreciation. Usually both.
Buy-and-hold investors don’t buy houses to turn over. They’ll pay a bit more for a house because they are looking to make money over time so they have some flexibility on price.
Buy-and-hold investors often get better deals on houses than investors who are looking to flip them. Sellers are often more willing to negotiate with buyers who are going to hold onto the property for the longer term.
There are risks in being a buy-and-hold investor. These risks can be minimized those risks through research and investing in a good location.
One of the biggest risks is that the house may not go up in value as much as projected. Real estate values generally go up but have a lot of up and downs in the short term.
Another risk is that buy-and-hold investors may have to hold the property longer than they planned. This can be a problem if they need to sell the property quickly.
Buy-and-hold investors can be cash buyers or they can finance through a conventional mortgage. They aren’t going to sell the property quickly so they can finance conventionally.
How Much Will a Flipper Pay For My House?
If you’re thinking of selling your home to an as-is cash buyer, you may have heard of the term “ARV” or “after repair value.” House flippers use ARV to calculate how much they’re willing to offer you for your home.
Here’s how it works: the buyer will research recent sales of similar homes in your area to get an idea of what your home is worth. They’ll then subtract the estimated cost of repairs and upgrades and their estimated profit from that number to arrive at their offer price.
For example, let’s say your home is worth $400,000 and the buyer estimates that it will need $30,000 worth of repairs and upgrades. Their offer price would be $280,000.
Of course, you’re not obligated to accept their offer. But if you’re considering selling to a flipper, it’s important to understand how they calculate their offers.
Are iBuyers a Scam?
There are some risks associated with working with an iBuyer, real iBuyers not a scam. Here’s what you need to know about iBuyers before you sell your house.
What are iBuyers?
iBuyers are companies that use AI technology to make instant offers on homes.
They’re typically backed by investors, so they have the cash to close on a home very quickly. iBuyers take care of all of the paperwork and repairs associated with the sale, so it’s a very hands-off experience for the seller.
The Pros of Working with an iBuyer
- iBuyers buy houses with cash and buy quickly.
- iBuyers take care of all repairs or paperwork.
- You can get a fair price for your home. iBuyers use data and technology to come up with a fair offer for your home. Do your own research and have an idea of the value of your house before you meet with any iBuyers or “Cash for Homes” companies.
The Cons of Working with an iBuyer
- You might not get the full market value for your home. Because iBuyers are looking to make a profit, they might not offer you the full market value for your home.
- You might have to pay some fees. This is not typical but be sure to ask about costs and fees when before they give you an offer.
- You might not have a lot of negotiating power. iBuyers offers are pre-determined by their technology. Once you accept an offer from an iBuyer, you might not be able to negotiate the price.
Should You Sell to an iBuyer?
Whether or not you should sell to an iBuyer depends on your situation. If you need to sell your home quickly and you’re okay with potentially getting a lower price, then an iBuyer is a good option.
However, if you’re not in a hurry to sell and you want to get the full market value for your home, you might be better off working with a traditional real estate agent.
Alternatives To Selling My House to an As-Is Cash Buyer
Here are some of the most popular options for selling your house fast for cash.
- List your house with a real estate agent.
This is the most common way to sell a house, and it can be a good option if you’re not in a huge hurry to sell. The downside is that it can take months to find a buyer, and you’ll have to pay a commission to the agent.
- FSBO: “For Sale by Owner”
This is a good option if you’re willing to do the work to market your house and show it to potential buyers. Spend time researching the value of your house. Too low and you lose money – too high and you lose buyers. Get a title company or a real estate attorney ready to help you close once you have a buyer.
- A Short Sale
If you’re behind on your mortgage payments and you can’t afford to bring them current a short sale is an option worth considering. With a short sale, you negotiate with your bank to sell your house for less than what you owe on the mortgage. The lender agrees to forgive the difference.
Final Thoughts on As-Is Cash Buyers:
Keep in mind that the majority of as-is cash buyers are actually a group of investors. In a tight market, you can negotiate with buyers because they need to make money for their investors.