I’m sure you’ve seen these signs everywhere! “We Buy Houses in Any Condition.” What’s up with this?!
Why would anyone want to buy a house in any condition?
These companies and sometimes individual are referred to as cash house buyers, house buyers or wholesalers, etc. These real estate investors will invest some cash into the property and either flip (re-sale) or rent out the property.
While cash buyers purchase homes at a discount, there are some non-monetary advantages.
Speed of Sale
Cash buyers typically close on the sale much faster than a traditional buyer using a mortgage to purchase a home. Some cash buyers will purchase a home as quickly 5-10 days, depending on the complexity of the situation.
Homeowners facing a foreclosure may find themselves with only days to sell their homes before they are auctioned. Having their home foreclosed destroys their credit and ability to purchase a home in the future.
Someone that inherited a house may have also inherited a hefty, unplanned mortgage payment and property taxes. Cash buyers can provide a level of speed in purchasing the home that most other buyers cannot.
Again, how quickly a cash buyer can close depends on the presence of liens, the complexity of title, and the number of parties involved. If the property is owned by a single party with a mortgage loan being the only lien, the closing can happen it as little as 3 days.
Regardless of the situation, an experienced closing attorney have the knowledge to get these issues handled and still close on a short timeline.
Buying “As-Is”
You find this hard to believe, but the worse shape a home is in, the more interested a cash house buyer/investor will be in purchasing it. Real estate investing is a numbers game. They won’t care if the home has termite damage or needs a new roof. Fire damage won’t even scare away the experienced investor.
Because they are repeat customers, real estate investors are often able to negotiate the cost of home renovations and repairs. Those discounts coupled with the lack of most buyers interest in homes that need significant work, lowers the market value of the home and leaves room for the investor to make a reasonable profit.
While some real estate investors will purchase homes in move-in condition, they typically prefer homes that need repairs.
No Real Estate Commissions/Closing Costs
In the DC area, most Realtors charge 6% commission. Saving on paying real estate commissions will give you more room to negotiate.
Additionally, cash buyers also typically pay all closing costs – something that tends to be covered by the seller in a traditional agent led market sale. Those closing costs can save sellers 1-3% of the sales price.
While you won’t need to pay any commissions or closing costs, your net profit from the sale may still be lower than what you would get if you sold the home on the traditional market.
Do cash house buyers really pay cash?
You may be asking yourself how these investors are purchasing these homes. Are they really buying them in cash? The answer is yes… and no.
Real estate investors typically use money from “hard-money lenders” (also called private money lenders) to finance their purchases. While it is technically still a loan, it’s not a loan in the traditional mortgage sense.
Conventional mortgages require underwriting, appraisals, and time to verify everything and authorize funding for the loan. Traditional mortgages can typically take anywhere from 21-45 days to close after the home is under contract.
These lenders lend them money at higher rates of interest that allows them to purchase a home quickly using their lender’s cash. These relationships enable cash buyers to buy a home without all the red tape typical mortgages require. Then the investor either flip the house or later refinance it using a traditional mortgage to become a rental – paying the private lender back their cash with interest.
As far as the homeowner selling the home is concerned, it is nearly identical to as if someone was buying your home in straight cash. Cash house buyers who have good relationships with their lenders- they don’t need appraisals, home inspections or the typical underwriting approval.
In this scenario, you won’t risk a buyer’s financing falling through, and not having the time to start the entire process all over again.
Not everyone who advertises themselves as a cash buyer is reputable. You can learn how to spot legitimate house buying companies and investors.
Need to sell fast?
We can help. Contact us for a quick complimentary consultation. We will present you with several viable options for selling your home based on your specific situation – including providing you with a free, no-obligation cash offer from one of cash real estate investors. Our clients buy houses all over the DMV area and strive to create win-win situations for everyone involved.
