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If you own your home and need to sell it quickly, you might be looking to get a cash offer. Many buyers offer to pay for homes in full instead of financing the purchase via a typical mortgage process. Cash offers can be appealing — they close more quickly and are less likely to fall through — but it’s important to do your due diligence when dealing with cash buyers. Some can be predatory and might offer substantially less money, assuming you are in distress, than you would get in a traditional sale.
Comparing the typical house closing timeline
Once you accept an offer on your home, it takes some time to actually close on the sale and receive payment. If you work with a typical buyer that gets a mortgage, it can take quite some time to close. This is because the lender needs to check the buyer’s credit and financial situation, order an appraisal and do its due diligence to ensure that your home is adequate collateral for the loan.
According to data from Ellie Mae, a real estate technology firm, it took an average of 57 days to close on a loan for a home purchase in early 2021. Some loan types, like FHA or VA, took even longer.
By contrast, closing with a cash buyer moves on a much shorter timeline. Cash closings can sometimes take as little as a couple of weeks. “The biggest pro of selling your home for cash is the speed at which it can be done,” says Jeff Shipwash, founder and CEO of Shipwash Properties in Knoxville, Tennessee. “Homes sold for cash can be completed as quickly as the title company can process the paperwork.” It’s complex, though, so you should definitely work with a real estate attorney to handle the legal details and closing.
Steps to selling your home for cash
1. Determine your home’s value
The first thing you need to do when selling your house is to figure out how much it’s worth. If you’re working with a Realtor, they can help with this by performing a competitive market analysis. This will tell you what other, similar houses nearby are being listed or sold for. While it won’t give you a definitive value — all homes and situations are different, after all — the information is very useful in deciding the price at which you should list your home. A professional appraisal can also help you determine the home’s value before you put it on the market.
2. Find a cash buyer
Once you’ve figured out the value of your home, it’s time to start looking for a buyer. You can put varying amounts of effort into this — the more effort you put in, the more you’re likely to get for your home. Here are three good places to start:
- iBuyers: iBuyers are online companies that use programs and algorithms to determine the value of your home and automatically make a cash offer. They usually then rent the home out or make minor upgrades and sell it for a profit. Working with an iBuyer is fast and easy, but because they then need to make money on their purchase, they’re not likely to offer the best possible price. (Anytime you sell to a middleman, someone other than an owner/occupant, you are likely to get less money than you would otherwise.) An iBuyer’s offer is only as good as its algorithm, which may not include an intricate knowledge of the local market.
- “We Buy Houses” companies: You might see advertisements for companies that buy homes for cash or that “buy ugly houses.” These companies make a profit by flipping homes — that is, buying them on the cheap, fixing them up and selling them again quickly. They can be a good choice if your home is not in good condition and you want to sell as-is. But, like iBuyers, these companies won’t pay top dollar for homes. And some are less than legitimate, so you have to be sure to do your research.
- Realtors: When in doubt, ask a pro! Local real estate agents are plugged in to the local market and know what local buyers are looking for. Ask around, and you may find a buyer, or even multiple buyers, looking to make cash offers for a home. This option is likely to get you the highest price for your home, though it will certainly take longer.
3. Acquire proof of funds and evaluate offers
No matter which type of buyer you go with, you want to take the time to evaluate each offer. The price is, of course, very important, but you should also consider things like the proposed closing timeline and any contingencies included. Don’t forget to get proof of funds from the people or companies whose offers you’re considering. You want to be especially mindful when there are large sums of cash changing hands — make sure that the buyer can actually afford to pay, and that they aren’t a real estate scammer. Experienced agents and attorneys can be crucial in vetting your buyer.
4. Compare cash offer to home value
Any cash offers you receive, particularly from an iBuyer or a “we buy houses” company, is likely to be on the low side. It may even be less than the home’s fair market value. This is because these buyers expect a discount for paying in cash. And sometimes, that’s fair enough. If you’re in a very hot market, you might be able to garner more with multiple bids, but that isn’t the case for everyone. And don’t forget that, while the closing process for a cash sale is usually simpler than for a financed sale, the closing costs don’t disappear. You can expect to pay similar fees to your agent, title company and more, regardless of the sale type.
5. Sign the contract
Once you’ve decided to accept an offer, it’s time to start the paperwork. Signing a contract makes the deal official. Work with your agent and attorney to determine the terms of the sale, including the price and the timeline of the close, before you sign.
6. Home inspection
Most potential buyers will want to inspect a home before they close on the deal, to make sure there aren’t any major defects that could cost a lot to repair. The inspector will examine the home, its foundation, and its exterior for any signs of problems, or potential problems. Many offers will include an inspection contingency, but even if it doesn’t, the buyer might still request an inspection. If you’re selling your home as-is, you won’t have to worry about making repairs or fixing up the home as a result of the inspection. However, as-is sales usually lead to lower offers.
7. Clear escrow and title
Before you can close on the sale, you’ll need to make sure that you have a clear title to the home and can legally transfer it to the seller. Your attorney can help you make sure all is as it should be. If you’ve previously paid off your mortgage, be sure that your lender filed a satisfaction. The buyer will also place money into escrow to show they’re serious about the purchase.
8. Review and sign documents at closing
The final step in the home selling process is the closing. This event is the finish line, where you’ll meet with both parties’ agents and attorneys and finalize the sale documents. As at any closing, there will be a lot of signing, initialing and check writing. Once it’s done, you’ll receive your payment and the home will become the buyer’s property.