How Does a Cash Buyer Come Up With an Instant Home Offer?

A cash buyer can provide an instant home offer. We’ll explain how they calculate an offer, when this may be a viable option, and how it can lead to a quick sale.

If you’re looking for options to sell your home, you may want to consider methods outside of the traditional process of listing and selling it on the market. 

For expert advice about cash buyers and to get an instant offer for your home, get in touch with us today at Simple Home Offer.

What are cash buyers?

Cash buyers provide simple fair offers to homeowners looking to expedite the sales process of homes needing minor updates. They are often local real estate investors, or i-Buyers, such as Opendoor, Offerpad, Zillow Offers, and Redfin Now.

Cash buyers can also be wholesalers, buy and hold investors, or flippers with local real estate knowledge that buy homes needing more extensive repairs or renovations before being resold.

Because cash buyers do this professionally, they’re often able to work quickly, providing an offer within one to two days. A homeowner can then close on their house’s sale within as little as one week, walking away with the cash value of their home.

How are instant cash offers calculated by a cash buyer?

To calculate an instant home offer, a cash buyer will pull the comparable sales in your area over the last six months to find the After Repair Value (ARV). This is the value your home would have if all of the repairs and updates were made to make it competitive with the other houses being sold in your area.

Cash buyers then typically multiply the ARV by 70% or 75% to factor out the interest, holding, realtor commissions, and closing costs they would incur while renovating your home. The calculation also includes a small profit margin of about 10%. By factoring out these costs the buyer calculates their potential profit. If they aren’t able to make a profit then it doesn’t make sense for them to purchase a home.

The cash buyer also estimates the amount required to pay for repairs and updates required to resell your home. Most cash buyers use a set amount for a price per square foot calculation. These amounts differ though from region to region.

Cash buyers fix dozens of homes a year, so they have established relationships with contractors, painters, plumbers, roofers, etc. This, along with large volume discounts for materials, allows them to pay lower than market rates for the work and get the work done more quickly than the average homeowner.

What does this mean for your home? If your house is in great shape you should be able to get a cash offer closer to that 70-75% below ARV. If it needs extensive repairs, the cash offer may be lower, as the buyer will need to invest more money to resell the house.

Why is a cash offer different from the value of my home that I see on sites like Zillow?

The offers are closer to fair market value than those that, for example, are generated online through tools such as Zillow’s Zestimate. These tools make an estimate for your home’s value by taking averages from home sales in your area over the last six months.

They don’t assess the condition inside of your home, so their estimate assumes your home is in the same condition as the other recent homes that sold successfully in your area. This number may be higher than the true value if your kitchen and bathrooms need to be updated or major repairs are needed.

In many cases, there are thousands of dollars worth of updates and repairs required to get your home up to that estimated value. A cash buyer excels at quickly getting your home up to that market value in the most efficient ways possible.

Is this a viable option for my situation?

If you need to sell your home, speed and efficiency are key to keeping costs down. The longer you have to hold the home, the greater your costs will be, including monthly mortgage payments, taxes, utilities, and maintenance costs. If time is of the essence and costs are a concern, a cash offer may be a viable option.

Inherited property after loved one passes away

The passing of a loved one brings many difficult challenges. If you inherit property as a result, you may not have the time or money to maintain it, and it may end up sitting vacant. If you decide to sell it, you need a simple process rather than one that presents more challenges.

A cash offer allows you to sell the home without having to clean it, fix or update it, and list it for sale.

Vacation or rental property is losing money

If an investment in a vacation or rental property is costing you more money than it earns, you may need a simple way to get rid of the expenses of owning the property. To keep yourself from losing more time and money, a cash offer can help you quickly and simply sell it.

In need of a quick move

If your circumstances cause a need for a quick move from your current home, a cash offer can make this possible unlike a traditional home sale. Sell the home within days, rather than waiting several months to move after it is listed, shown, and someone makes an offer.

Divorce 

If you own a home with a former spouse, selling it through an instant cash offer can save you from an extended legal battle because of your divorce. Selling to a cash buyer allows you to follow through on a decision quickly so that you can move forward. The cash from the sale can pay off your shared mortgage, potentially clearing you from a large shared financial liability.

Foreclosure

To get out from under the ongoing debt of owning a house, which can lead to foreclosure, sell the house quickly to a cash buyer. Relieve yourself from the debt by paying off your current mortgage using money from the sale. This allows you to more easily afford your other living expenses and improve your credit score.

How do cash buyers ensure a quick sale?

Because cash buyers buy and fix dozens of homes a year, they have an established process for buying homes efficiently. This ensures a quick home sale with a simple process.

The alternative of preparing, listing, showing, and negotiating with buyers to sell your home through the traditional route can take several months.

Simple Home Offer can help you start the process smoothly by helping you find a trusted cash buyer for an instant home offer. Tell us about your situation, and we’ll recommend a reliable buyer that fits your specific needs.

Reach out to us or complete our quick online form to get started and sell your house fast for cash.