As the name suggests, the cash companies offer all cash to the home seller.
These are the homebuyer companies who want to buy the property without needing to mortgage loan or seeking other financing options. Since these offers are fast and cash, they same attract loads of sellers.
If you have also got a cash offer on your home and you are considering this option, then it is imperative to know all about it.
Is Cash Home Offers Common?
If you are thinking that you are the only one who knows about the cash offer, then it is not so. It has become a much more prevalent concept than you would have thought.
As per the data from ATTOM Data Solutions, cash home sales in 2018 have collected more than a quarter of single-family home sales and condo sales. Though they offer a cash offer which is much lesser in amount than the open market, still cash home sales achieved a peak in 2011.
Again, the ATTOM Data Solutions research indicated that out of the metro statists areas, the highest cash purchases happened in Montgomery, Alabama which was 54%.
A cash home offer is more common when:
- An investment company is interested in buying a home immediately.
- The buyer just sold a home and now has money to buy another one for cash instantly.
- The sellers themselves contacted the iBuyer about purchasing the house.
- The property needs major repairs and renovation and sounds like a good option for a fix-and-flip home
Cash offers are attractive and can sound like a great deal to many. With the help of top real estate websites, it can make the transaction more lucrative and meaningful to many. If you are looking forward to buying and selling a house, then it is critical to understand how these offers work.
How Does a Cash Offer Work?
Working with a cash company is extremely different than the traditional buying and selling process that involves a realtor and a long list of selling a house steps. Here is how the cash process is different than others:
This process is way faster than the traditional selling route. The absence of the requirements such as mortgage application, proper papers, underwriting, appraisal, and more, makes the cash home sale quicker.
But you also need to know that as a buyer you must be willing to work on the title policy, documents the insurance, proof of funds, closing documents, etc. As per some cash companies who buy old homes, you can close a cash offer in less than two weeks.
Another important point that deserves discussion is the appraisal. It is generally asked by the lender. So, when you don’t have a lender at all, you don’t need to worry about it. But sometimes the buyer still wants to get the appraisal done. This is often seen in cases when they are an investor and they want guaranteed returns.
Out of the types of contingencies such as financing contingency, sales contingency, and inspection contingency, there are rare chances of any contingencies with cash home sales. The buyers do not need mortgage loans and sales too which avoids finance as well as sales contingency. However, there have been cases when the buyers want an inspection contingency.
The best part about cash companies is the ability to do the closing process faster and simpler. When you are a buyer, you will have to sign the settlement statement, title, cashier’s check, and deed, and then get the home keys. When financing is not needed, there is a significant reduction in the paperwork. The closing costs are much lower in the absence of lender fees.
Title Deed and Escrow
The buyer needs a title and escrow company. The same is needed to manage real estate transactions. It may be more difficult selecting the parties when there is no lender. You can research and compare fees.
One of the main aspects of the cash transaction is that the buyers need to confirm whether they are capable enough to pay the amount to the seller. When there is the concept of the mortgage loan, the buyer has a pre-approved document and talks to the seller accordingly.
In that case, he has been vetted by the lender that they can manage the mortgage payment. But when we are into the cash sale, there are no such safety measures. The buyer must provide evidence to the bank that mentions the details of the proof of funds.
Cash Transaction – Yes, or No?
If you are thinking about whether to accept the cash offer or not, then know the advantages as well as the downsides of the cash deal.
Advantages of Accepting the Cash Offer:
- The sellers have more confidence in the deal. Cash deals do not fall through.
- The best benefit of the cash deal is that the same offers a faster closing
- In this type of real estate dealing, you don’t have to bother about your credit score.
- Also, you don’t need to conduct a home appraisal
- Since there are no interest payments, you are able to save a lot of money gradually.
- The cash transaction lowers the requirement for paperwork and documentation.
Downsides of a Cash Offer:
- Cash offer companies charge a service fee
- A cash offer may not pay you a good amount as an open market.
- There is no competitiveness in the market.
- If the market is hot, then you may find other interested buyers.
- The buyer not only pays cash to the seller but also needs to pay for the property taxes, insurance, HOA, moving expenses, etc.
Cash offers have serious advantages and downsides too for a seller as well as a buyer. So, it cannot be said that it is the right choice or not. It depends on your preference, urgency, priority, and more. If you are selling a house, think about both the pros and cons of the cash home-buying aspects.
Also, consider the cash-buying company you are going to work with. To make sure that you are going to a trusted and reputable business, pick a national name such as Opendoor, Offerpad, RedfinNow, etc. Search by writing companies that buy houses for cash near me on the search engine.
Also, consider other ways of selling the house such as listing on the MLS at a flat fee using the services of the best companies such as Houzeo. You can also speak to your real estate agent or top real estate websites and get to know the right direction.