It can seem too good to be true if you receive an offer to pay all-cash for your house. That’s a lot of money for someone to have at the ready.
Although a cash offer isn’t typical, it can make selling a house easier, whether that’s to a trusted instant offer company or a savvy private buyer.
A little research can help you avoid scam offers and understand the pros and cons of working with a buyer that can pay for a house with an all-cash offer.
Types of Cash Buyers
Many cash buyers are real estate investors, such as instant offer companies or house flippers.
Instant offer companies, or iBuyers, are tech-based real estate investors that buy and sell houses online, streamlining the process for themselves and their customers. Unlike flippers, they offer a higher price for homes that only need minor updates or repairs before reselling.
Flippers will pay a lower price for a home that needs major renovations, as they invest in upgrading and reselling houses at a higher value.
Otherwise, a private buyer might purchase a house as a rental property using all cash. This could also include a homeowner who saved or inherited cash for a house, allowing them to avoid a mortgage.
To make sure the offer isn’t from a scammer, we link to five tips to verify you’re working with a trustworthy buyer, including knowing their interest in the home is legitimate, having a sensible timeline for exchanging cash, providing clear contact information, giving upfront terms and fees, and making an in-person visit to the house before finalizing the sale.
Pros and Cons of Paying All Cash for a House
Compared to purchasing a home with the financial help of a mortgage, an all-cash purchase can bring more flexibility to the sales process regarding timing, price, and rules because the process isn’t dictated by the mortgage lender. Lenders can be strict with the sale as they need to know they’re not making a risky investment.
A cash offer means you can close a sale within seven days. This is much faster than the average of 30 or more days it can take to finalize a mortgage and close a sale when working with a lender. With no lender involved, there will be fewer contingencies or obstacles that can slow or halt the sale.
No Lender Costs
By not involving a lender for a mortgage, there are no requirements for appraisals, inspections, or other lender requests, also meaning there will be no added fees for these services.
Only certain types of buyers are able to pay all cash for a house, so options might be limited. iBuyers are currently in target markets across the country. Private buyers will be more or less available depending on local market conditions. If there are no instant offer companies in your area, there are ways to find other types of cash buyers.
Less Negotiating Power
Financially, the buyer might have the advantage when negotiating a final price because they’re providing an easy out for the seller. The cash offer allows the seller to save time and effort with the sale, possibly making a lower price a worthwhile trade-off. This could involve compromising on price to sell the home as-is and avoid spending time and money to repair it.
On the buyer’s end of the sale, they will deplete their cash by paying for the house up front. As houses aren’t necessarily quick to resell for the average buyer, this could be a risky asset in which to invest so much cash. This is where an iBuyer has a business model that is set up to successfully buy and resell houses daily.
Closing the Sale
There are certain steps and costs within a real estate transaction that are necessary, whether it’s an all-cash purchase or it involves a mortgage. With an all-cash purchase, however, the seller and buyer have more say and will complete fewer steps, because there are no lender requirements.
Below are the steps it takes to close an all-cash sale:
- Work with a third party such as an escrow company, realtor, or attorney to close the sale.
- Terms must be agreed upon by the buyer and seller for the property’s title, such as whether it needs to be cleared from any loans against it, before transferring it to the buyer.
- If the seller has a mortgage, the third-party that will transfer funds to pay the mortgage will need the seller’s payoff amount and mortgage account number.
- All documents will need to be signed and filed with the county or city to close the sale.
- The third party can then send the final mortgage payoff amount to the seller’s lender, or the earnings directly to the seller, and transfer the title to the buyer.
Paying for a House All in Cash
With this breakdown of cash offer pros and cons, homeowners can decide if an all-cash offer would simplify the sale of their house by providing flexibility, speed and convenience. For the future, it might give motivation to save money and pay all cash or put more money down when buying a home.
Through iBuyers, reliable all-cash offers are becoming more available and can be a simpler option, depending on what’s right for your situation and your home.