When you need to sell your house fast or can't afford massive repairs, selling to a "we buy houses for cash" company can be your best option. In San Diego, it can take 84 days to sell your home from list to close. In comparison, a cash buyer can complete the transaction in about a week.
Plus, these companies buy homes as-is, meaning there's no need to deal with the hassle or cost of repairs.
If speed, certainty, and convenience are your top priorities, "we buy houses for cash" companies might be the solution you're looking for.
While these companies have undeniable benefits, they don't always outweigh the potential drawbacks (like low offers). Depending on your situation, a cash buyer could be your best option. But before you accept an offer, consider all your choices first.
In this article, we'll look at how "we buy houses for cash" companies work, what types of offers they make, and what the top companies are in San Diego.
Read on to get the answers you need to find the best way to sell your home.
To buy homes quickly and make a profit, most "we buy houses for cash" companies use the same process:
- A homeowner submits information about their property, and the cash buyer decides if the home fits their criteria for a profitable investment. If the house fits the investor's criteria, they may give the seller a rough estimate of what they'll pay.
- A representative from the company will evaluate the property and based on the repair costs and resale value, they'll make a cash offer.
- If the seller accepts, closing happens quickly; there's no need for inspections, appraisals, or financing approval.
- The "we buy houses for cash" company makes repairs and sells it, hopefully for a profit.
Compare this speedy process with the traditional home selling process:
- If your home needs extensive repairs, it can take months (and tens of thousands of dollars) to complete.
- In San Diego, a home typically spends 39 days on the market before the seller receives an offer.
- The closing process can take an additional 30-45 days, if the buyer applies for a mortgage. You'll have to deal with appraisals, inspections, and further negotiations with the buyer.
- If financing is denied, the house has to go back on the market.
Traditional home selling process vs. "we buy houses for cash" companies
|Traditional Listing Process||"We Buy Houses for Cash" Process|
|Prepping the House||Depending on the condition of your home, repairing and preparing it for sale can take months.||0 days; these investors buy homes as-is.|
|Time to Offer||39 days^||Typically 24 hours after viewing the property|
|Closing Process||30-45 days||As few as 7 days in San Diego|
|Minimum Time to Sell||84* days||8 days|
^Days on market based on Realtor.com metro-level data
*Assuming you can find a buyer who will buy your home as-is allowing you to avoid spending time on repairs.
As real estate investors, "we buy houses for cash" companies need a buffer that increases their chances of a profit. This is where the 70% rule comes in.
Essentially, the 70% rule says a cash buyer shouldn't pay more than 70% of the property's After Repair Value (ARV) — what they hope to sell the house for in a fair market — minus repairs. This gives them some wiggle room if the house's condition is worse than suspected or it takes longer to resell the home.
All-cash offers in San Diego: 2 examples
Depending on the repairs your home needs, a "we buy houses for cash" company might be your best option. But if your home needs fewer or less expensive repairs, selling to a cash buyer can mean losing more than you realize.
Let's look at some examples of cash offers a homeowner could expect in San Diego.
In both cases, we'll use the city's average home value of $685,247 as the ARV. Assuming the house is the same size as others in the area, that's more or less what "we buy houses for cash" companies will try to resell it for after renovations. The big difference in these examples will be the amount of repairs the house needs.
A home in need of major repairs
In example No. 1, here are all the necessary repairs and their average costs:
- New siding: $5,715
- Bathroom remodel: $16,749
- Fresh interior paint: $2,127
- New central AC: $5,853
Here's how a cash buyer will calculate their offer:
|70% of ARV||$479,673|
|Cost of Repairs||$30,444*|
|Max. Cash Buyer Offer||$449,229|
That offer is 34% below fair market value, which seems like the investor is getting an unfair discount.
But, the truth is, most homeowners don't have almost $31,000 to pay for the repairs. And that's assuming the contractors don't go over budget.
Instead, for these sellers, the best option is a quick sale that allows them to avoid all the costs and hassles of making repairs.
If the cost of fixing your home is similarly high, selling to a "we buy houses for cash" company could be the right choice.
A home in need of minor repairs
In example No. 2, the house only needs a few updates in the kitchen, which include:
- Refinished cabinets: $3,602
- New countertops: $3,438
Here's how an offer from a "we buy houses for cash" company would break down:
|70% of ARV||$479,673|
|Cost of Repairs||$7,040*|
|Max. Cash Buyer Offer||$472,633|
*Based on HomeAdvisor local cost estimations
In this example, the cost of repairs is significantly less, but the offer is 31% below fair market value.
Instead of losing almost $213,000, the seller has other options that would lead to a sale price closer to the fair market value of $685,247. The homeowner could:
- Pay for the repairs out of pocket
- Make minor repairs themself to lower the total cost
- Offer a repair credit to potential buyers
"We buy houses for cash" companies are extremely beneficial to certain sellers, especially:
- Homeowners facing foreclosure
- People who've inherited unwanted property
- Homeowners who can't afford extensive repairs
Let's look at how cash buyers meet the needs of these sellers.
Cash offers mean speed and certainty
The longest parts of the home selling process involve buyer financing. A lender can spend weeks underwriting a loan, and if the buyer isn't approved, you have to start all over again.
Cash buyers don't need to go through this lengthy process. They already have the money and if they make an offer, it's very unlikely they'll back out.
No need for repairs
Finding a buyer who will take a house as-is is a big plus for sellers in a hurry, especially given how long repairs can take.
Homeowners can also avoid losing a ton of money by selling as-is. Yes, "we buy houses" companies make lower offers to account for repair costs. But it's not uncommon for contractors to go over budget and there's no guarantee you'll recover the cost of repairs and renovations.
Selling a house is expensive. There are associated costs that add up and eat away at sellers' profits. Here are some expenses homeowners avoid by selling to a cash buyer:
- Closing costs: In most cases, "we buy houses for cash" companies cover typical closing costs.
- Seller concessions: During negotiations, sellers often agree to pay a percentage of the buyer's closing costs — also known as seller concessions. In California, it's common to offer 0.9-1.5% in concessions to close the deal. Since there are no negotiations with a cash buyer, there's no need to offer seller concessions.
- Agent commissions: The average commission in California is 4.6-5.4%. Since selling to a "we buy houses for cash" company doesn't require an agent, homeowners avoid paying commissions.
- Carrying costs: Every day a seller owns a home costs money. Expenses like mortgage payments, insurance, property taxes, etc. can add up to $94 a day in California. Since "we buy houses for cash" companies close much faster than a traditional sale, the total carrying costs are much less.
Cost to sell to a cash buyer vs. a traditional sale
|Traditional Sale||"We Buy Houses for Cash" Company|
|Carrying Costs*||$94 per dayA total of $7,896 for the typical 84-day sales process||$94 per dayA total of $752 for an 8-day sales process|
^California seller concessions and commission rates based on a Clever survey of 500+ real estate agents
*Carrying costs based on data from the U.S. Census, Insurance.com, Move.org, WallerHub, and Clever Real Estate
Cons of we buy houses for cash companies
Of course, "we buy houses" companies aren't the right choice for every seller. Here are some drawbacks to consider before accepting an offer from a cash buyer.
Consider an example where the home needs 10% of its ARV in repairs. If you sold to a cash buyer, they would deduct that from their offer. If you sold with an agent you could cover that 10% in a variety of ways (lower price, repair credits, etc.).
However, even by avoiding other selling costs, selling to a "we buy houses" company still leads to a lower take-home amount because their offers are never more than 70% of ARV.
|Selling to a "We Buy Houses" Company||Selling with a Traditional Realtor|
|Sale price (compared to fair market value)||70% max.||100%|
|Max Take Home||60% max||83.5% max|
There is no negotiating with "we buy houses for cash" companies. They use their own representatives to evaluate your home and necessary repairs. If you disagree, your only option is to walk away. You can't try to negotiate for a higher price.
Often, homeowners who consider "we buy houses for cash" companies are facing difficult life situations. The seller could be going through a divorce, facing foreclosure, or dealing with the death of a loved one.
Some "opportunity investors" take advantage of these situations and may pressure sellers to accept incredibly low offers.
"We buy houses for cash" companies are never your only option. It's important to weigh all important factors (time to sell, take-home amount, convenience, etc.) before making a decision.
Let's look at a breakdown of how much a seller in San Diego could walk away with through three different selling options.
We'll use the median sale price in San Diego, which is $599,000, and relevant selling cost rates (closing costs, repair costs/credits, carrying costs, etc.)
San Diego cost breakdown
|Selling to a "We Buy Houses" Company||Selling with a Traditional Realtor||Selling with Clever|
*Based on data from Redfin
☨Based on the 70% rule and assuming the house needs 10% of its ARV in repairs
^Based on HomeAdvisor national average
**Based on the average time it takes for homes listed with Clever to receive an offer (13 days) and a 45-day closing process
>>LEARN more about selling with Clever
Making your decision
Even if you need to sell your home quickly, you shouldn't rush to make a decision about who to sell to. There are many "we buy houses for cash" companies out there and you don't want to choose the wrong one for your situation.
Remember to consider all the benefits and drawbacks of selling to a cash buyer.
Once you've weighed all of your options, you'll be able to confidently sell your home. Whether you chose to work with a "we buy houses for cash" company or go a more traditional route, you'll know you made the right choice for your situation.