Getting a guaranteed cash offer on your home may seem like a pipe dream. Misconceptions about cash home buyers are floating around everywhere, primarily because of shysters that like to take advantage of people in dire situations. Fear not! Reputable home buyers are companies that work openly and go the extra mile to ensure those in need know their best options. We all need help sometimes, and knowing the pros and cons of different solutions helps us to overcome our problems and come out on top.
Working with cash home buyers can be a lifesaver, but how does it work? Read on to find out what everyone should know about getting a guaranteed cash offer on your home and working with cash home buyers.
One of the most significant benefits of getting a guaranteed cash offer on your home is that you can investigate the buyer. When you list your property on the open market, you don’t know who your buyer is. You may get their name from the offer to purchase contract, but you have a major communication barrier… The Real Estate Broker. For years, this has been the de facto way to sell your house because the law requires that a broker protects the three components of information that, if known by the buyer, could give them a “one-up” on you in negotiations. Those three things are:
- Your motivation for selling
- That you may agree to any price or terms
- Things you consider confidential (excluding material facts)
While this adds a layer of protection, it also keeps you from collecting your own information and deciding if the buyer is going to be able to complete the sale. Even if that buyer has a pre-qualification letter from their lender, there’s no guarantee they can close. You can’t assume the sale to a pre-qualified buyer because there are two parts to the qualification process:
- The qualification of the buyer
- The qualification of the property
Not only does the bank need to make sure the buyer has the income necessary to make their payments, but they also need to make sure the property can sell for enough to recoup the remaining balance of the mortgage if the buyer defaults on the loan.
When you’re applying for a guaranteed cash offer on your house, you’re usually working with a direct buyer whom you can research and qualify before going under contract. If that person is a part of a Home Buying Business, they’re easier to investigate than an individual investor. That’s because reputable companies tend to have a professional website, a social media presence, and, most importantly, reviews. Do a google search for “[name of company] reviews” and see what comes up. Are they text-only reviews that give you a first name and the last initial? The reviews you want to see are video reviews (where the client is standing in front of the camera discussing their experience) or written reviews that give the client’s full name and a photograph.
If you can keep it simple, you can keep it understandable and reduce or eliminate confusion and anxiety associated with the activity. When listing your home on the open market, the process is more challenging because your broker will require so many things from you. Organizing contractors for repairs, cleaning, closing, moving, negotiating, re-listing (if a buyer falls through), and leaving for showings are just a few things that go along with the listing process. Stack that with what’s required of you when you’re buying another house to live in, and it can get intense.
The reason so many people are investigating direct offers before they list on the open market is because of how simple they are. There are three primary steps to a guaranteed cash offer on your home:
- Investigation: The home buyer tours the property and completes a sweeping analysis
- Offer Acceptance: An offer is negotiated and accepted
- Closing: The home buyer organizes the closing, and it takes place in just a couple of weeks or less
Sprinkle in some challenges that can arise from title issues and major property damage before closing, and that’s the worst it can get. In most cases, you don’t have to make any repairs or clean out the house. What’s also nice is that you can usually choose the closing date.
The Offer Amount Is Guaranteed (Minus Taxes)
When you accept a cash offer, you’re paying no commissions, fees, or closing costs. The home buyer normally takes care of these fees. Usually, the buyer will want to close with their own attorney because they get a volume discount. If the seller chooses to use their own attorney, the buyer could certainly require that the seller cover those closing costs (or the difference of what they usually pay).
The only money coming out of your proceeds would be property and excise taxes. The type and amount of taxes may vary from state to state, but the principles stay the same. Excise tax is a tax that North Carolina has for when you sell specific goods, including houses. You can calculate excise tax by taking the total sale price of the property and dividing it by 500.
Property taxes work differently. The seller pays the taxes for the year up to the closing date, and the buyer pays everything for the rest of that year. If the seller has already paid for the entire year, the buyer reimburses them for the taxes they would owe.
Some home buyers also have a monetary guarantee that comes along with their offers in the form of Earnest Money. The major difference with this earnest money is that the seller gets to keep this money if the buyer backs out, regardless of when they do. In an open market listing, there is something called a Due Diligence Period, where the buyer has time to investigate the property. They put down earnest money, which goes to the attorney for safekeeping until the deal is closed. But if the buyer decides not to buy the property before the Due Diligence Period has ended, they get their earnest money back! You don’t have to deal with a Due Diligence period when you get a guaranteed cash offer on your home, though. That money goes right to you no matter when the home buyer backs out!
No Bank Involvement
There’s no bank involved in the cash offer process. Banks are slow, bureaucratic behemoths that get wrapped up in their own red tape and take exceedingly longer to get anything done. A big reason many don’t understand is that they have to do two qualifications in order to get the deal done. That means even if a buyer puts in an offer and is “pre-qualified,” it still doesn’t guarantee a simple and expedient closing. The two qualifications that need to take place are:
- Qualifying the buyer: credit score, available cash, not too much debt, etc
- Qualifying the property: inspection, appraisal, etc
That means if both aren’t qualified, the deal doesn’t go through. Period.
When a home buyer is getting you a guaranteed cash offer on your house, they don’t have to worry about these stumbling blocks because they use one of three things to purchase properties:
- Their Own Cash: No explanation is needed
- Asset-Based Loans: Loans that focus on the house itself, not the buyer
- Private Money Loans: Individuals who lend money to the buyer from their savings
Let’s squash one misconception right now. Buying a house for cash is the phrase that direct buyers use to attract sellers, because sellers know that cash is fast. Write a check or hand me a big stack of one-dollar bills, and we’re done! The reason investors still use this phrase, even if they’re not using their own cash per se, is because all the options mentioned above can be equally fast. They can be placed in the closing attorney’s trust account in a matter of hours. The attorney having quick access to the money speeds the process, and they can purchase the property extremely quickly, while a bank would be at the starting line, stumbling over their own red tape.
Investors Don’t Compete On Price
When you’re selling your home on the open market, the idea is price, price, price. Who is going to get you the highest and best price for your home and with reasonable terms? When your primary motivation for selling your house is the highest price, listing your property on the open market is the best way to go!
When you’re getting a guaranteed cash offer on your home, primary value proposition lies in the terms:
- Can they close fast so I get a move to where my new job is?
- Can they get my psycho spouse to sign?
- Can they stop my foreclosure so it doesn’t destroy my credit?
- Can they take on this property I inherited so I don’t have two mortgages?
- Can they clean and fix the house so I don’t have to?
If you’re looking into a cash offer, you may think, “I don’t want a shyster to lowball me! I know what my house is worth.” Reputable home buyers will not only give you a reasonable guaranteed cash offer on your house, but they’ll also break it down for you and show you how they came up with that offer. Sometimes the property needs repairs, which will require not only contractor work but also utilities, costs of money, and taxes you’ll need to pay while you’re getting the repairs completed.
Convenience & Safety
The goal of listing your house on the open market is to get it in front of as many interested buyers as possible, and it does! Every day, millions of people log onto websites, including Realtor, Zillow, and Redfin, to see what’s available and even get ideas on how they want to update their homes. Once you or your broker has submitted it to the local Multiple Listing Services, it is “syndicated” (i.e., sent) to every real estate website currently available, so everyone and their grandmother will see your house. While this is a blessing, it can certainly be a curse for some people.
That’s because the next step to getting those offers is to have prospective buyers walk through your property. The advent of 360° virtual tours has helped some properties sell site unseen, but walkthroughs are still number one since the buyer can get a feel for the house and confirm whether they want to live there. That means you’ll have people you’ve never met before walking through your home at all hours of the day, and you’ll need to leave before they arrive. The more sellers we’ve talked to, the more we’ve discovered how distasteful it is to most sellers. Getting a guaranteed cash offer on your home is one way to skip the hassle and safety concerns of multiple buyer walkthroughs, which is why we’ve seen more and more people reaching out for this reason alone.
If you have cameras up in your house, it will help you monitor what’s going on when you’re not there; just make sure you’re not recording audio. That is entirely illegal, and you could get into significant trouble if someone found out.
Getting a guaranteed cash offer on your house is nothing new; it’s just not mainstream. Real estate brokers have a lot of tools at their disposal, and their trade organizations (Realtors especially) advertise like crazy, so they stay top of mind for anyone looking to sell their house. The challenge they have is that they understand how to solve a seller’s problem in one way. List their house. A direct home buyer, in contrast, has an entire toolbox of ways they can buy your house regardless of the situation. The direct buyer’s toolbox means you can sell your property in as little as five days, whereas a listing would take between 30 and 90 days to close.
Even if you’re just considering selling your house, be sure to reach out to a direct home buyer who specializes in your area to get a guaranteed cash offer on your house. You don’t have to accept it, but it gives you a good idea of what your home can sell for quickly, and bring that to your broker to help plan your listing price. If you have questions, reach out to us! We’re happy to help!