Selling your house to a cash buyer can be tempting, especially in a down market. Ready cash and a quick sale is appealing. But is it the best option for you? Here are some pros and cons to weigh when considering selling to a cash house buyer:
The Pros of Cash House Buyers
1. Speedy Sale
Cash buyers can sometimes close in as little as 7-10 days. You get your money fast and avoid a long, drawn-out sale. This works well if you need to relocate or liquidate quickly.
2. No Mortgage Contingency
Buyers financing a home purchase can back out if they hit snags getting a mortgage. All-cash deals have no financing clause, so the sale is more likely to close.
3. Flexible Timeline
Cash investors may purchase properties “as is.” That saves you time and money on repairs and cleanup. Some are even willing to buy an occupied home and then let you stay in it rent-free for a period.
4. No Showings or Open Houses
You avoid the hassle of prepping your home for showings and open houses. Just accept the cash offer and move on.
The Cons of Cash House Buyers
1. Below Market Value Offers
Cash buyers typically offer 10%-25% under market value to profit on their quick flips. That missing equity could add up to tens of thousands you lose out on.
2. Limited Competition
With one offer on the table, you lack the advantage of bidding wars and multiple competing offers driving up the price.
3. No Agent Guidance
New home sellers benefit from the expertise of an agent guiding them through the process. Cash sales are direct, with no representation or advisor in your corner.
4. Investment Condition Homes
Cash buyers often look for cosmetic fixers they can quickly rehab and resell for big profits. Your home may be left looking “loved” versus move-in ready.
Questions to Ask Before Accepting a Cash Offer
- How did they arrive at their offer price? Get comps for better negotiating leverage.
- Are there any hidden fees or closing costs for you?
- How quickly must you vacate after closing?
- Do you have recourse if they default on the sale? Get it in writing.
- Is the offer contingent on any inspections or appraisals?
Ultimately, the convenience and speed of a cash sale must be weighed against leaving equity on the table. Companies like Cash House Buyer Guru offer advice on cash house buyers (see this Springbok review, for example) who provide full market value cash offers, helping you decide. Consult an attorney and agent before signing anything.
Selling to a cash buyer is not an all-or-nothing proposition. With the right considerations, you may be able to get the best of both worlds – a fast sale and optimal value. Here are some tips to maximize your proceeds even when dealing with a cash investor:
Counter at Higher Price
Cash buyers expect you to come back with a higher price. Don’t accept their first offer. Consult comps and agents to establish fair market value. Counter at least 5-10% above their initial offer, citing comparable sales. Cash buyers expect negotiation, so don’t be shy.
Provide Independent Appraisal
Paying for an independent appraisal gives you an objective price opinion to support your higher ask. Cash buyers know this appraisal would hold weight if you went to court over valuation disputes.
Offer Home Warranty
Sweeten the deal by purchasing a one-year home warranty covering repairs after the sale. This gives the buyer peace of mind and saves you from dropping the price for minor fixes.
Take Advantage of Urgency
If the cash buyer needs to flip your home quickly, use that urgency as leverage. Remind them of the headaches and costs of tying up capital in a prolonged sale. Dangle other (even imaginary) buyers to pressure them.
Educate Yourself on Market Value
Consult real estate agents to learn the true market value and typical bargaining ranges. Know what nearby homes have recently sold for. You’ll negotiate from strength armed with this data.
Sell with Contingencies
Rather than a simple all-cash sale, create protections for yourself by selling with contingencies. Make the sale contingent on you finding suitable housing, closing your new purchase, or occupying the home for a period after closing.
Stage Properly to Maximize Value
Staging demonstrates pride of ownership that buyers reward with higher offers.
Be Ready to Walk Away
If the cash offer still comes in too low after negotiations, be willing to walk away. List the home on the open market or contact other cash buyers. Just be sure you have solid reasoning for your counter price.
Check References Thoroughly
Research the cash buyer online for reviews and complaints. Verify previous transactions with sellers to confirm they are reputable and deliver on promises. Don’t assume all cash buyers are equal.
Consult Your Tax Advisor
There may be capital gains tax implications if you sell below market value. Understand possible tax penalties before accepting a reduced price. Your advisor may have tips to minimize tax impacts too.
The bottom line is cash buyers need you more than you need them in most cases. Bring data-driven expectations, patience, and a willingness to negotiate into the deal to get your best return on investment. Just don’t let convenience blind you to leaving real money on the table. Know your walkaway number beforehand.