Are you wondering if it makes sense to sell your home to an all cash home buyer? Because every home, every person and every situation is different, there is no simple yes or no answer. The right choice for one person may not be the best solution for another. In this article, we will walk you through a cost-benefit analysis that will help you decide if you should sell your home to a reputable investor or list it on the MLS to sell it the traditional method.
Let’s start by look at the differences between a real estate agent and an all cash home buyer.
What are the Goals
The goal of a real estate agent is to earn a commission. To accomplish this, they need to obtain a listing from the seller, place the home on the market, and hope to find a buyer. The primary method a real estate agent sells a house is to list it on the Multiple Listing Service (MLS). Depending on the condition of the property, this can be a very effective method or a frustrating waste of time.
Most home buyers seeking to buy a house listed on the MLS are looking for their dream home. If your home needs moderate to extensive repairs and upgrades, selling through the MLS could be very challenging. How many homebuyers will fall in love with a fixer-upper that needs extensive repairs? Even when everything goes smoothly, selling a home with a real estate agent will typically take a minimum of 2 months but will likely be several months longer. There is a reason a real estate agent will demand a 6-month listing agreement.
A cash home buyer is looking to purchase homes at a fair price based upon the extent of the repairs and improvements the home needs and will close in 10 days or less. They understand that they need to be flexible and fulfill the needs of the seller. Their goal is to structure an all-cash deal that is a win-win for both parties, provides a reasonable return on their investment while trying to avoid excessive risk.
Now let’s look at the differences between selling your house the traditional method versus selling to a cash buyer.
Time Frame to Sell
To successfully sell a house the traditional method, you first need to make repairs and improvements to enhance the property’s appeal. Depending on how much work is needed this process can take weeks and sometimes months. The next step is to list the home for sale in the MLS. Once listed, you will need to show the home and host open houses until an offer is received, negotiated and a contract is signed.
After finding a buyer, the sale could fall through if the home does not pass a comprehensive inspection. The job of the inspector to find things that need to be repaired or updated, and they almost always do. Even after you get past the inspection, the average home buyer must qualify for a loan to purchase the home. Many times this will create additional delays or can cause the deal to fall through. This is a lengthy process with a lot of uncertainty. According to the Zillow Consumer Housing Trends Report 2018, the typical US home spent between 65 and 93 days on the market. That did not include any of the time spent preparing and updating the house for listing.
OutFactors and similar all-cash buyers will typically provide a seller a no-obligation all-cash offer to purchase the home within 1 day. The purchase is not contingent on financing, and we typically close in 10 days or less. During that time, we will also do an inspection, but we are only looking for major items that may have been missed during our initial visual inspection. The inspection is never used to demand repairs. This is a huge advantage over the traditional method, especially if you need to sell the home fast.
Cash Required to Sell the Home
When selling a home the traditional method, the future owner will most likely expect his new home to be in good condition. As the seller, you will be expected to make the repairs detailed in the inspection report which will need to be paid by the seller before closing. Depending on the work required, the cost to do repairs and improve curb appeal can be substantial.
The risk and cost are much greater when the home is vacant and you are paying the insurance, utilities, and property maintenance. Any money spent to maintain a vacant home while it sits on the market waiting for a buyer is lost forever. According to a report by HomeAdvisor.com, in 2018 the national average to repair and prepare a home to sell was $11,186, which does not include staging and property maintenance. Even after you complete all of the repairs, there is no guarantee that the house will sell for a price high enough to recoup your investment.
If you are selling your home to an all-cash buyer, like OutFactors, the funds required to complete the sale are zero. As an all-cash home buyer, we don’t require the seller to do any repairs. We buy your home as-is, if we budgeted incorrectly or missed something, that is our problem. You are paid cash at closing and OutFactors assumes the risk and expense of repairing the house.
Seller Paid Commissions
Real estate agents get paid by the seller at closing. The commission fee is typically based upon a percentage of the selling price, which is usually 6%. This means if your home sells for $250,000, the seller will pay the real estate agent $15,000 at closing. This fee is not adjusted whether you sold for a low price or it took the agent 6 months to sell the home. It will also not be lowered if you had to spend $25,000 on unforeseen repair expenses to fix things identified in the inspection report.
To avoid the high commission fee, many sellers consider doing for-sale-by-owner. While this is tempting, selling a home is a very complicated undertaking with many potentially expensive pitfalls. You will need to perform market research, implement a marketing strategy, pay for advertising, hold open houses, screen buyers, and draw up a plethora of paperwork.
When you sell to a cash buyer like OutFactors, there is never a commission or hidden fees.
Flexibility when Selling
When you sell your home using the traditional method there is very little room for negotiations. The buyer will expect to move into their new home as soon as they have closed. Likewise, the buyer and their lender typically set the closing date based upon their schedule. Many times, the seller is not sure when or if the closing will go through until 2 days before the actual closing. The seller is at the mercy of the process.
When selling to OutFactors or similar all cash home buyers, it is purely a financial transaction. Our programs and terms are designed around the needs of the seller. Do you want to sell but are in no hurry to move, OutFactors will buy the home and rent the house back to you in what’s called a sale-leaseback. Most cash home buyers like OutFactors are extremely flexible, just tell them what you want to accomplish and they usually can make it happen.
Now Let’s Compare the Amount of Cash the Seller Can Expect to Receive
When you sell the traditional method there are so many fees paid by the seller, such as commissions, legal fees, closing costs, title fees, taxes, surveys, tax certificates, and escrow fees that it can be very difficult to calculate the amount the seller will receive at closing. For this comparison, we are relying upon industry averages assuming the home sold the traditional method for $250,000.
- Gross sales price: $250,000
- Pre-marketing repairs/improvements: $ 11,186
- Real estate commission at 6%: $ 15,000
- Seller concessions/post inspection repairs at 1%: $ 2,500
- Home warranty for buyer: $ 500
- Land survey: $ 400
- Title Insurance: $ 2,100
- Escrow and closing fees: $ 1,700
Total fees with traditional method: $ 33,386 *
Cash to Seller: $216,614
Every city, state, and community is different, so your fees may be lower or higher than the example.
When you sell to OutFactors or similar investors calculating the amount of cash you will receive is easy and straight forward. Investors like OutFactors have low fixed fee agreements with closing agents, which allow them to guarantee the fees paid by the seller. This way, the seller will know how much cash they will receive at closing – no bad surprises. For this example, we will calculate the fees assuming the cash home buyer is buying the same home as-is for $218,000.
- Gross sales price: $218,000
- Pre-marketing repairs/improvements: $ 0
- Real estate commission at 6%: $ 0
- Seller concessions/post inspection repairs at 1%: $ 0
- Home warranty for buyer: $ 0
- Land survey (cash buyers do not need a survey): $ 0
- Title Insurance: $ 1,800
- Escrow and closing fees: $ 900
Total fees selling to a cash buyer: $ 2,700 *
Cash to Seller: $215,300
As noted in the above examples, the seller will receive slightly more money selling the traditional, but was that worth all the time, hassle, expense, and risk? When selling to an all cash home buyer like OutFactors, the seller received their cash in 10 days, did not have an open house, selected their closing date, moved out when they chose, and left all of the work to clean and repair the home to the cash buyer. Is an easy sale with no risk, no work, and all the benefits worth $1,300? We think so, and so do many other home sellers.
Over the years people have become accustomed to selling their home by hiring a real estate agent but that is changing. People are realizing that it is quicker, easier, and better selling to a cash home buyer like OutFactors. Sellers see the advantage of selling to an all cash buyer simply for the convenience and avoiding financial risk – especially in these uncertain times when a pandemic can cause the market to fall or crash.
Selling a home to OutFactors is fast and super simple. You will get an offer in 1 day and we can usually close in 10 days. To get started click here, all you need to do is answer four simple questions – it is that simple.
We hope this article was informative and helpful. If you have any questions feel free to contact us at OutFactors.com.
539 West Commerce Street
Dallas, Texas 75208
Does it Make Sense to Sell My Home to an All Cash Home Buyer? | OutFactors — Dallas, Texas