Find An Agent

Companies That Buy Houses: How It Works, Reviews, Pros & Cons

Cash buyers and iBuyers expedite and streamline the home selling process, but that speed and convenience can come at a steep price. Before you decide to sell your house to a company for cash, make sure you understand the potential tradeoffs and explore all of your options. Read on to learn more: how selling a house for cash works, pros and cons, how to spot a scam, and alternatives to consider.

Companies That Buy Houses: How It Works, Reviews, Pros & Cons

If you’re considering selling your home to a company for cash, you have three primary options:

  1. Local Cash Buyers: small companies or individual property investors that pay cash for homes to flip, redevelop, or rent.
  2. We Buy Ugly Houses: a nationwide network of local property investors who will make cash offers on homes, regardless of their condition or location, to flip or redevelop.
  3. iBuyers: venture capital-backed companies that leverage digital technologies to buy and resell homes on a large scale.

So how do these companies actually work, what’s your best option when you need to sell your home fast, and how do they compare to selling with a top agent?

Read on to learn more about selling your house for cash: how it works, the pros and cons, how to spot a scam, and how to sell fast for the best possible price.

Selling Your House for Cash: How it Works

While cash buyers and iBuyers may operate a bit differently from one another, the basic business model is the same: buy properties, fix them up (if necessary), resell for a profit.

Generally speaking, these companies will make offers quickly — often within 24 to 48 hours of request — then, pending the outcome of an on-site inspection, purchase your home for cash, which usually means a much faster closing timeline.

The key advantage here is speed: when selling to iBuyers, your total sale timeline could be as fast as 10 to 14 days. If you’re selling to a cash buyer like We Buy Ugly Houses, expect closing to take a bit longer — anywhere between two and five weeks.

That said, that speed and convenience can come at a price. iBuyers typically charge service fees, ranging from 6% to 15%, depending on the company, to mitigate risk and maintain their margins.

Similarly, most cash buyers, local investors, and flippers will pay well under market value for your home — sometimes by as much as 20-50% — to ensure they turn a profit on each transaction, even in the event of an unexpected market downturn.

The Good News: Fast Cash in a Bind

If you’re under a ton of pressure to sell quickly due to extenuating circumstances like foreclosure, bankruptcy, divorce, a new job, etc., cash buyers and iBuyers could be a lifesaver.

Working with a cash buyer is almost 100% effortless. You won’t have to deal with fixing up your home to sell, fielding offers, negotiating, and all the paperwork involved with a traditional sale.

The key is assessing all of your options (e.g., cash buyers, iBuyers, or real estate agent) to ensure you’re making the best decision given your specific situation — and that you fully understand the potential tradeoffs of each approach.

The Bad News: You’re Not Necessarily Getting the Best Deal

Listing with an agent will almost always get you more money because they’re motivated (and well-equipped) to get you the best price, as quickly as possible.

If you opt to sell to a company for cash, don't expect to get more than fair market value. Remember, the company isn't buying your house to live in — the plan is to resell it for a small profit. It needs to ensure it maintains a decent margin on each transaction.

Most cash buyers will only offer the seller about 65% of the home’s value.

iBuyers will likely offer closer to fair market value, but they typically charge a fee for the transaction.

Think of the experience similar to trading in your old car when buying a new one.

Chances are you aren't going to get market value on your trade-in because the dealer needs to ensure it can resell it for more than it paid.

That said, you get to walk away without having to fix it up or deal with the hassle of selling it yourself. In other words, you have to weigh the benefits of selling for cash (speed, convenience) vs what you give up (a chunk of your equity).

It’s important to note that traditional buyers might still offer cash. If this is important to you, be sure to work with an agentto help find the right buyer.

How to Spot an “Opportunity Investor”

Many cash buyers target homeowners who are desperate to sell immediately with the promise of fast cash. These companies are often referred to as "opportunity investors."

The sellers they typically target could be bankrupt, going through a divorce, in foreclosure, or having a hard time finding buyers.

Oftentimes, these investors will advertise without a company name, only listing a phone number with a message that says, “We’ll buy your house for cash!”

Because they can avoid financing, opportunity investors usually offer to wrap up a sale within 30 days.

They will persuade sellers by offering cash and usually pass on inspections, making the entire process seem easy as can be.

For homeowners who might be feeling frantic and are determined to sell fast, these opportunity investors might come off as lifesavers.

Do a Thorough Review

Most opportunity investment companies will lure sellers in with the promise of avoiding paying real estate commissions.

They’re doing this to avoid conflict of interest or a lawsuit. Home buying companies are ripping off the seller in the first place, and they know that charging a commission on top of this will only shine a light on their risky business model.

Before considering an offer from an opportunity investment company, do your homework through the Better Business Bureau and other online review sources.

Ask friends who may have used a home buying company about their experience.

You’ll find that 90% of sellers end up turning down their offers from opportunity investors because of shady business practices and lowball offers.

How to Sell Fast for a Great Price

If you need to sell your home immediately and are willing to sacrifice some of your equity to do so, you may want to consider selling to an iBuyer.

This is by far the fastest approach (the sale can go through in as little 10 days) and you'll likely take a smaller hit than if you sell to a cash buyer or house flipper.

Keep in mind that many iBuyers only operate in a handful of major cities across the U.S. and have strict criteria regarding condition, style, size, and location of the homes they buy.

If you're trying to sell a property that is in poor condition or an undesirable location, the cash buyer route is worth considering. There are certainly circumstances in which the tradeoff on price is a fair tradeoff for just getting the sale over and done with.

Either way, it's worth exploring all of your options — including listing with a real estate agent — before you pull the trigger and accept an offer from a cash buyer or iBuyer.

Listing with a realtor won’t get you an instant cash offer, but top real estate agents will use aggressive pricing and marketing tactics to help you sell quickly and for a good price — often at or above market value.

If you'd like to speak with a top agent in your area, Clever can help.

> Get in touch to interview top-rated, local real estate agents to find out if they might be able to help you sell in your required timeline and for a better price.

Note: our referral service is free and there's zero obligation to sign with one of our agents.

Even if you ultimately end up accepting an offer from an iBuyer or cash buyer, you'll have peace of mind knowing that you explored all of your options and made the right decision, given your needs and goals.

SHARE

Jamie Ayers
Jamie Ayers

Jamie is the Director of Content at Clever Real Estate, the free online service that connects you with top real estate agents and helps you save thousands on commission. In the past, Jamie has managed columns for clients in a variety of leading business publications, including Forbes, Inc., CEO World, Entrepreneur, and more. At Clever, Jamie's primary goal is to provide home sellers, buyers, and investors with the information they need to successfully navigate the ins and outs of the real estate industry.

See all Jamie's Posts
WHAT'S NEXT

Sell Your Home with a Top Agent and Save Thousands

Learn how you could save thousands when you sell with Clever!

whats next house

Better real estate agents at a better rate

Enter your zip code to see if Clever has a partner agent in your area.

If you don't love your Clever partner agent, you can request to meet with another, or shake hands and go a different direction. We offer this because we're confident you're going to love working with a Clever Partner Agent.