Process of selling your home for cash
If you own your home and need to sell it quickly, you may be looking for a cash offer. Many buyers offer to pay for homes in full instead of financing the purchase through a typical mortgage process. Cash deals can be attractive – they close faster and are less likely to fail – but it’s important to do your due diligence when dealing with cash buyers. Some can be predatory and may offer far less money, assuming you’re in distress, than you’d get in a traditional sale.
Typical Home Closing Timeline Comparison
Once you’ve accepted an offer on your home, it takes some time to close the sale and receive payment. If you’re working with a typical buyer getting a mortgage, closing may take some time. This is because the lender must check the buyer’s credit and financial status, order an appraisal, and do their due diligence to ensure that your home is adequate security for the loan.
According to data from Ellie Mae, a real estate technology company, it took an average of 57 days to close a home purchase loan in early 2021. Some types of loans, like FHA or VA, took even more time.
In contrast, closing with a cash buyer moves on a much shorter timeframe. Cash closes can sometimes take as little as a few weeks. “The biggest benefit of selling your home for cash is how quickly it can be done,” says Jeff Shipwash, founder and CEO of Shipwash Properties in Knoxville, Tennessee. “Homes sold for cash can be completed as quickly as the title company can process the paperwork.” It’s complex, however, you definitely need to work with a real estate attorney to handle the legal details and closing.
Steps to selling your home for cash
If you’re considering selling and want to sell your home for cash, there are strategies you and your realtor can use to make sure that happens. Follow these eight steps.
1. Determine the value of your home
The first thing you need to do when selling your home is figure out how much it’s worth. If you work with a real estate agent, they can help you by conducting a competitive market analysis. This will tell you what other similar homes nearby are listed or sold to. While it won’t give you a definitive value – all homes and situations are different, after all – the information is very helpful in deciding what price to list your home at. A professional appraisal can also help you determine the value of the home before you put it on the market.
2. Find a cash buyer
Once you’ve determined the value of your home, it’s time to start looking for a buyer. You can put varying effort into it – the more effort you put into it, the more likely you are to get for your home. Here are three good starting points:
- iBuyers: iBuyers are online businesses that use programs and algorithms to determine the value of your home and automatically make a cash offer. They then usually rent the house or make minor improvements and resell it for a profit. Working with an iBuyer is quick and easy, but since they then have to earn money on their purchase, they are unlikely to offer the best possible price. (Any time you sell to an intermediary, someone other than a homeowner/occupier, you’re likely to get less money than you otherwise would.) An iBuyer’s offer doesn’t is only as good as its algorithm, which may not include complex market knowledge.
- Companies “We buy houses”: You might see ads for companies that buy houses for cash or “buy ugly houses.” These companies make a profit by flipping houses, i.e. buying them cheap, fixing them and reselling them quickly. They can be a good choice if your house is not in good condition and you want to sell as is. But, like iBuyers, these companies won’t pay top dollar for homes. And some are less than legit, so be sure to do your research.
- Real estate agents : When in doubt, ask a pro! Local real estate agents are plugged into the local market and know what local buyers are looking for. Ask around and you might find a buyer, or even several buyers, looking to make cash offers for a home. This option will likely get you the highest price for your home, although it will definitely take longer.
3. Obtain proof of funds and evaluate offers
No matter what type of buyer you’re going with, you want to take the time to evaluate each offer. Pricing is, of course, very important, but you also need to consider things like the proposed closing schedule and the contingencies included. Remember to obtain proof of funds from the people or companies whose offers you are considering. You need to be especially careful when large sums of money change hands – make sure the buyer can actually afford to pay and is not a real estate scammer. Experienced agents and attorneys can be crucial in vetting your buyer.
4. Compare the cash offer to the value of the house
Any cash offers you receive, especially from an iBuyer or a “we buy houses” company, are likely to be low. It may even be less than the fair market value of the house. This is because these buyers expect a discount for paying cash. And sometimes that’s fair enough. If you’re in a very active market, you may be able to reap more with multiple offers, but not everyone can. And remember that while the process of closing a cash sale is generally easier than a financed sale, closing costs don’t disappear. You can expect to pay similar fees to your agent, title company and more, regardless of the type of sale.
5. Sign the contract
Once you’ve decided to accept an offer, it’s time to start the paperwork. Signing a contract makes the deal official. Work with your agent and attorney to determine the terms of the sale, including price and timing of closing, before signing.
6. Home inspection
Most potential buyers will want to inspect a home before closing the deal, to make sure there are no major flaws that could be expensive to repair. The inspector will examine the house, its foundations, and its exterior for any signs of trouble or potential problems. Many offers will include an inspection condition, but even if this is not the case, the buyer can still request an inspection. If you sell your home as-is, you won’t have to worry about making repairs or fixing the home after the inspection. However, as-is sales usually lead to lower offers.
7. Clear Escrow and Title
Before you can close the sale, you need to make sure you have clear title to the house and can legally transfer it to the seller. Your lawyer can help you make sure everything is as it should be. If you have already paid off your mortgage, make sure your lender has filed a satisfaction. The buyer will also place money in escrow to show they are serious about the purchase.
8. Review and sign documents at closing
The final step in the process of selling a home is the closing. This event is the finish line, where you will meet with both parties’ agents and attorneys and finalize the sales documents. As with any closing, there will be many signatures, initials and checks. Once this is done, you will receive your payment and the home will become the buyer’s property.