Let's talk about those handwritten signs you see hanging out on residential street corners and stapled to telephone poles at exits. You know the ones-- they promise to buy your house for cash. "Should I sell my house for cash?" pops into your mind every time you pass them.
As the market peters to a slow trickle of buyers, those signs begin to look more appealing every day. You may be on a timeline for a job, from a divorce, or you are on your last leg and can't afford to keep the house anymore.
But before you call that number you'll want to read this.
In this article, we'll describe the clear advantages and disadvantages, and give you several alternatives you can use even if you have to sell your house fast.
No Repairs Needed
A major hang-up to selling your house is the number of repairs that are often needed. Perhaps the roof needs replacing and the electrical needs updating. These repairs may be the condition of conventional buyers to take it off your hands, but they're not your only option.
When you sell your home for cash, you are selling it to an investor. Investors don't want you to renovate because that's how they're able to get a good deal on the sale. These investors that need some TLC because they want to complete them and sell your property for a profit later.
No repairs are good news for you because that is one less thing on your to-do list and debit card.
The good news is selling your house for cash means the timeline is much shorter. It's shorter because you don't have to hunt down sellers-- you already have an interested party.
You can skip the staging, cleaning, and walk-throughs. Beyond that, many times there will be no appraisal or inspections, and no wait times on the funding.
This could cut months-- or even years!-- off your selling process.
This quick process goes like this:
- You call up the investor and tell them a little about your house
- They'll ask a few questions, then give you an offer
- You accept or reject their offer
- If accepted, you close within a few weeks
Keep in mind that what you save in time, does end up costing you money. More on that later.
No Financial Hiccups
One of the largest killers of the home sale process is the funding. The lender of the buyer is usually on their own timeline which results in extension after extension of the contract. The lender also has to gather an unholy number of documents and send out a few people to inspect and appraise the property.
In the end, you may find out that the buyer is not approved to purchase the house, and that whole process was a waste of time.
This doesn't happen when you sell your home for cash.
There is no lender involved which means no one to halt the process. This makes for less paperwork and the avoidance of a whole slew of other things.
Speaking of halts to the selling process, there is nothing like getting a buyer and finding out they want you to wait until their house sells before they'll buy yours. Contingencies like that sure put a damper on your selling process, and you're stuck drumming your fingers on the table before you can even schedule a mover.
You don't have contingencies when you sell for cash, however.
There are no contingencies telling you the offer is only valid if you install new flooring or redo the siding. The process is cut and dry with no strings attached.
You may be thinking after reading the advantages that you need to get in on this sell for cash thing as soon as possible. Before you dial that number, though, remember you wanted to see this through.
There is a price to pay for all those wonderful promises. They are as follows.
A Cut in Price
This one's a biggie. You may have had dreams of using all that cash to fund your next vacation or pay for a new house.
Before you start perusing Travel Magazine, however, you may want to take a closer look.
A cash offer on the spot from an investor without seeing the property means they are most definitely going to get the bargain price. This sweet deal could be anywhere from 20-35% less than what you would get from selling your house with an agent.
Those numbers may seem a bit small for you there, so here's an example.
Let's say you've done your homework and come to the conclusion that your house is worth $350,000. A cash paying investor will look at that number and subtract the repairs they'll have to do. They'll also take away some money for the risk they're taking on. In the end, their offer for your $350,000 house will be between $227,500 and $280,000.
If that's a pay-cut you're willing to be ok with, this probably isn't an issue. For those that want to make as much off their home as possible, though, this will be a difficult price to swallow.
It Could Be A Scam
Not every sign that boasts enough cash to buy your house is a scam, but a fair number of them are.
Real estate agents have certain rules and regulations to abide by and are accountable to their brokerage-- or they can't sell homes.
When you work with investors, however, there are no such rules.
Be on the lookout for these telltale signs that you are being scammed:
- They charge an application fee. Most investors stand to make money on the sale of your house, they don't need to make it from an application fee. If they do ask for one, it's a good sign to back out.
- Your credit report declares that someone has taken a second mortgage out on your house. Never give your information over to a company until you know the reason they need your information and that their claims are legit.
You'll Still Pay Closing Costs
On top of the investor slashing the price of your home, if you are still paying on a mortgage for your house, there will be closing costs. Closing costs are for the legwork that your lender needs to do to close out your account and transfer the title.
You'll also need to pay back any money that you owe on your house out of the cash you receive.
Alternatives to Selling Your House for Cash
If you're on a timeline or budget and need to sell your house fast, there are alternatives to it for cash.
Rent it Out
The first alternative is to rent out your house. Often the income you receive each month from rent covers most-- if not all-- of your monthly mortgage payment.
Of course, there is upkeep involved. If you don't want to handle the tenant screenings and repairs, you could hire a property manager to oversee the property. You'll end up paying them a fee every month to do so, but it's worth it for many people.
This is a great option if your house is in a desirable neighborhood and has the potential to make some good money. Depending on how close you are to paying off your mortgage, you could pay off the house and make a handsome profit in no time.
Lease to Own
Leasing your home out is like renting it, but there is less work involved on your end. Those who want to lease to own usually do so because their credit doesn't allow them to buy a house.
Lease to own usually means that they'll be responsible for the property and look after it as if it were their own. That means you won't get any early morning calls about burnt out light bulbs or clogged toilets.
Use a Discount Agent
If the amount of money it costs to get an agent is what has driven you to consider selling for cash, there is a better way. Use a full-service discount agent to market your home effectively and get you the money your home is actually worth.
It's not as easy as receiving an offer and closing in a few weeks, but it will put thousands of dollars back in your pocket.