It’s a good time to be a homeowner.
It’s an even better time to be a homeowner looking to sell.
Whether you’ve owned the property for nine months or 19 years, you’ve likely built up some pretty serious equity in your home.
And assuming that you price it reasonably and there’s nothing catastrophically wrong with the property, you won’t have any shortage of interested buyers.
Depending on how you sell it, this may include cash buyers and “we buy houses for cash” companies.
The question is, should you sell your home to these “we buy houses for cash” companies?
Or are you better off selling via a more traditional approach with a financed buyer?
Dive into this article with me and we’ll take a look.
Cash has always been king in real estate investing, but it’s especially powerful in today’s market. And while it wasn’t long ago that cash transactions were primarily associated with neglected and foreclosed properties that would never qualify for traditional financing, we’re seeing cash transactions at every price point from starter homes all the way up to million-dollar properties.
According to a study conducted in late 2021, all-cash home sales are at their highest point since the first quarter of 2015. In total, 34 percent of all single-family homes and condos were bought without any financing. In other words, one in three properties is being purchased with cash.
According to a 2022 survey conducted by HomeLight, 58 percent of real estate agents believe the rise in cash offers will continue to persist beyond the current housing craze. Today’s sellers have grown accustomed to the speed, convenience, and certainty of cash deals and will continue to have those expectations moving forward.
Now, when it comes to selling a home in cash, there are a number of different situations and buyers. For example, you can sell to an individual cash buyer who simply has the cash to make a purchase of this magnitude and wants to live in the property as their primary residence. (When you list your home on the MLS and put a for-sale sign in the yard, you’re going to attract this type of cash buyer – as well as buyers with traditional financing.)
But what about those “we buy houses for cash” companies? (You’ve seen these companies advertise with bright-yellow signs at intersections, bus stops, and on billboards.) What’s their deal?
Companies that will buy your house for cash are all different. Each company has its own method, approach, and motivation. Here are a few:
As you can see, there are plenty of options. Whether it’s an individual cash buyer on the MLS or a professional like a house flipper, iBuyer, or investor, there’s no shortage of cash in the marketplace right now. But how do you know when to sell your house to one of these companies?
Here are several reasons that selling for cash makes sense:
Now, having said all of this, selling for cash isn’t always the right decision. In some cases, it can actually minimize the value you get in return for what’s likely your biggest financial asset. Research shows that mortgaged home buyers typically spend 11 percent more than all-cash buyers. (Having said that, you’ll also need to use real estate agents in a traditional sale, which can zap up five to six percent of the sale price right off the bat.)
If your house is on the higher end of the market and doesn’t need much work, it doesn’t make a whole lot of sense to work with a “we buy houses for cash” company. Having said that, you’ll probably find quite a few individual cash buyers willing to put in an offer once the house goes on the market.
At InvestNet, we provide private equity investment exposure to individuals who are looking to diversify their portfolios and gain access to advanced opportunities across the lower middle-market.
Selling your house and/or liquidating other assets with the intention of diversifying your portfolio with private equity deals? Contact us today to learn how we can help!