Selling for Cash
Trading some of the market value for speed, convenience and certainty.
Selling a house for cash is very different from selling through a traditional real estate process. The seller is essentially trading some of the home’s market value for speed, convenience and certainty. Cash buyers are often real estate investors or contractors.
Why do homeowners agree to cash sales at below market value?
Life changes are occurring and a traditional sale is not feasible.
- Foreclosure: the homeowner is running out of time to sell before a scheduled trustee sale at an auction.
- Inherited property: heirs want to liquidate a house without repairing or maintaining it.
- Out-of-town owners cannot handle the demands of selling a house.
- Expensive repairs: the house needs a roof, heating and air conditioning, foundation work or major renovations, and the seller does not have the money or will not spend it.
- Financial pressure: mortgage payments, taxes or other obligations have become unaffordable and staying in the property is not beneficial.
- The property has become vacant.
- The owner no longer wants responsibility for managing tenants and renting.
- A divorce or death has occurred.
What a cash sale actually looks like
A typical transaction goes something like this.
- The homeowner is contacted by an investor, or by a real estate broker who has investors.
- A cash offer is presented to the owner or the owner’s agent.
- If an accepted contract is completed, there is an evaluation of the property, including its condition, location, repairs needed and title.
- The property is sold as-is, without the seller making repairs.
- Any tenants must be aware of the sale and cooperate.
- A title company or settlement attorney will verify the ownership and outstanding loans and debt.
- Closing usually takes place within 14 to 21 days of an accepted contract.
- Sometimes a credit report is done to verify the seller has no hidden liens or judgements.
Cash sale compared with a traditional sale
| Cash sale | Traditional sale | |
|---|---|---|
| Price | Below market value | Market value |
| Total time from contract acceptance to settlement | 10 to 22 days | 35 to 90 days |
| Appraisal | None | Required, and can alter the price |
| Showing the property | Just the buyer or the agent presenting the contract | Buyers and agents will expect to see the house |
| Inspections | Can be done for informational purposes and could alter the offer price | Usually done, and usually the basis for requesting the seller makes repairs |
| Repairs and cleaning | None | Usually some, and it can be expensive and time consuming |
| Financing contingency | None | Usually present, and this creates uncertainty |
| Proof of funds to close | Should be provided to the seller; source is not documented | Mandatory, and must be an approved source by the lender |
| Type of buyer | Investor or contractor | Owner occupant |
| Seller costs disclosed | Not required, and should be determined | Required |
| Commissions paid | Can be seller or buyer; should be disclosed | Can be seller or buyer; should be disclosed |
| Seller renting back | Negotiable | Negotiable |
What sellers must know
- Does the cash buyer intend to assign the contract to another investor, rather than purchase the property themselves?
- Does the buyer have proof of funds?
- Can the buyer’s identity be verified?
The seller should
- Obtain proof of the buyer’s funds.
- Establish all seller fees and expenses.
- Have the contract reviewed by an appropriate professional (lawyer or real estate broker).
If a real estate broker is involved, find out:
- Who does the real estate broker represent — seller, buyer or neither?
- Who pays the real estate broker?
- Is the real estate broker licensed in Virginia?
Contact Shep Saltzman
For a confidential conversation about your situation and all of your options.
Shep Saltzman — Principal Broker, Ashbrooke Realty, LLC
11870 Sunrise Valley Drive, Suite 100
Reston, VA 20191
Call or text (703) 448-1313
realshep@gmail.com