Are All Cash Home Buyers The Same?
If you’ve decided that selling your home fast to a cash buyer is the right way to go, you probably have a few questions such as:
- “How do I decide which is the right one to work with?”
- “Are they all the same?”
- “Do they all offer the same purchase price or does that vary from buyer to buyer?”
- “If it varies, how do I know who’s going to give me the most money?”
- “Can they really close in just 7 days?”
- “Are there any “gotchas” to look out for?”
These are just some of the questions that you should be thinking about when you are considering selling your home fast to a cash buyer.
If you are taking this route rather than listing with a realtor, your home probably needs some work to bring it up to full market value. That means you will be selling to a rehabber.
Here are some answers…
Deciding on the Right Cash Home Buyer
Not all of the people claiming to be a cash home buyer are really able to actually complete the transaction.
The 3 Types of Cash Home Buyers
Many buyers have very little cash themselves and are simply an “acquisition agent.”
An acquisition agent really has no intention to close the transaction, but hopes to “assign” a contract to another buyer who can. While they claim to be purchasing the property, that’s not entirely accurate.
What they are really doing is attempting to place the property under contract and then quickly shop for another wholesale buyer to purchase the contract from them before they actually close the transaction with you.
It is this second buyer who will actually be buying your home.
The goal of the acquisition agent is to buy your home at such a deep discount that even after adding profit for himself, he can sell to a true rehabber at a low enough price that it makes economic sense to the rehabber.
You can usually identify who these people are by the terms in their purchase contract.
The contract will have a large number of contingencies built in which they call “due diligence”. These contingencies are really designed to give them an “out” if they are unable to find a second buyer before you’re scheduled to close. These are the people who will also offer the least for your home because they need to create a profit for both the actual buyer and themselves.
Acquisition agents will typically offer you the least amount of money for your home since they have to make a profit both for themselves and for the real buyer.
Ask any potential buyer to bring along “proof of funds” with any offer.
Even if they plan to borrow the purchase money from a lender that they have a business relationship with they should be able to show proof that they have the funds available and can close the deal.
A cash investor intends to close on the transaction and then hire a contractor to complete any necessary repairs before putting it back on the market.
This buyer is planning to make a profit even after paying the contractor so he will need to buy your home at a deep enough discount to accomplish that goal.
The amount an investor offers will be pretty close to the amount offered by the acquisition agent we talked about before. The main difference here is that this guy can actually close the transaction and you don’t really care what happens after that.
General Contractors That Purchase, Repair and Sell Homes
The third type of buyer is one with a general contractor’s license who plans on using his own crew to repair the property before putting it back on the market.
This is typically the person who will offer the most cash for your home because his costs are lower for the rehab work. But that’s not always the case…
Tips For Selling Your Home Fast
- Ask any potential buyer to bring along “proof of funds” with any offer. The buyer should be able to show proof that they have funds available to close, even if the buyer plans to borrow money from a lender that they have a business relationship with.
- Don’t take for granted that the buyer with the contractor’s license can offer the most cash for your home. The acquisition agent has a list of contractors to assign the sales contract to and some of them may actually offer a better price. The same is true for the buyer who will close but hire the contractor as he may have a relationship that gives him costs at about the same level. The best way to assure the highest price possible when selling your home is to get three bids. Make sure that all three potential buyers know that they are competing against each other so that they give you their best cash offer.
- Any “real” investor knows how to inspect a property. They can accurately determine what will be needed to repair the property and how much it will cost . With that in mind, it’s not necessary to make the contract contingent on an inspection. Therefore, I would suggest that you either strike that clause from the contract completely, or require the forfeiture of some part of the earnest money deposit if the clause is exercised. That will separate the real investors from the pretenders.
- Make sure you have a good purchase agreement when selling your home. A well-drawn purchase agreement that clearly spells out what each party is responsible for, and when they are expected to do it, should ensure no “gotchas” during the transaction. In most cases, these investors are very reputable business people who would like to buy your home at the lowest possible price without any intention of cheating you.
Here’s the Bottom Line:
The best way to assure the highest price possible is to get three bids. Make sure that all three know that they are competing against each other and to give their highest and best offer.
Selling Your Home Can Be A Process
Any fast cash buyer with proof of funds can close the transaction in as little as 7 days but don’t count on it.
Typically the contract will be written with an “inspection clause.”
This clause allows the investor to enter into the sales contract now under the terms and conditions that you’ve agreed to. The inspection clause allows time to bring in experts to confirm the estimations of costs to rehab.
Additionally, it gives you the chance to put together all of the documentation that might be needed from you to facilitate the transaction. Count on something being uncovered during this part of the transaction which might require a modification to the original offer.
For example, if foundation problems are found during the inspection process that were unnoticed before, expect the buyer to want to reduce the price before completing the transaction.
If you have any questions that are not answered to your complete satisfaction, you should absolutely seek council from a local real estate attorney before moving forward with a transaction. I guarantee you that it will be worth the fee in just peace of mind.
For more information on selling your home fast to a cash buyer, call us at (800) 407-5696 or click the picture below: