Why Would Anyone Sell Their House to a Cash Home Buyer Company?
As a cash home buyer, I can tell you I get asked this question on a regular basis. Almost like an accusation: “Why would I sell to you when I can just list with an agent and get a higher sale price?”
This is a fair question of course. A cash buyer like me will typically pay less for a home than a ‘retail’ or end-user buyer, or a buyer that intends to occupy the property long-term. As a for-profit business, if we don’t buy a home at a discount we don’t make money when we fix it up and resell.
The short answer is convenience. A sale to a (reputable) cash buyer is faster and easier than a ‘traditional’ agent sale on the MLS. For a more complete answer however, that’s a bit more involved.
Assuming you have decided to sell your home, there are several factors to consider to determine the best strategy to suit your goals. I say goals rather than ‘to get the highest price’ because pricing is really only one of many important factors when selling a home. Many sellers don’t think about this, understandably, because they may only sell a house once in their life. This is what I do on an almost daily basis, so please indulge me and hear me out on some of the other important factors.
TIME: When listing with an agent, expect a minimum of 30 days before closing and actually getting payment. I say minimum because 30 days is a standard escrow time frame- there are of course exceptions, as every purchase contract is negotiable and unique. While it is possible to close faster, 30 days is anticipating a standard escrow time frame and getting a buyer (that sticks) immediately after listing. An experienced and professional cash investor can typically close as fast as 7 days from offer acceptance (possibly faster depending on your particular state’s restrictions).
CONVENIENCE: A traditional sale involves a LOT of moving pieces. A brief overview: cleanup and staging for marketing, buyer showings and open houses, waiting for an offer or negotiating multiple offers, and contingencies for inspections, loan approval, and appraisal. There will also usually be a team including two agents, a title company, escrow company, inspector, loan officer, and more. All of whom will need to be included on communications and will have their own paperwork, requirements, and costs. A professional home buyer cuts out almost all of this, eliminating the need for loan approval with their cash offer and taking care of most everything else in-house. This can be a game-changer if the home is in need of updates or repairs, as a cash investor buys as-is and completes any needed work themselves. Not only do repairs scare off many end-user buyers, but they can often prohibit loan approval.
COST: If numbers are the only consideration, there is absolutely a more important number than sale price and that number is net profit. While a traditional sale will normally grab a higher sale price, there are also many costs attached that eat away at what actually goes into a seller’s pocket. Many sellers aren’t aware, for example, that the seller is typically expected to pay for both the listing and buyer agent commissions. With all costs accumulated, it’s not unusual for a $400,000 sale for example to net less than $370,00 after commissions and fees. A cash investor buyer will typically pay all associated closing costs and will have their own license, eliminating the need for an agent.
There are a lot of factors to consider when choosing between a cash home buying company and traditional agent sale to an end user, but it really boils down to two general scenarios. If you have a home in great condition that shows well and has been recently updated, and time is not a factor, list with an agent. It’s worth it to deal with the headaches and complications to get more money from your sale. If you have a home needing repairs or updates, or if time is a factor due to a pending foreclosure or urgent relocation, or you just don’t want to deal with the headaches of a listing, selling to a cash buyer should be a consideration.