We’ve all seen ads like “We Pay Cash for Houses, We Buy Ugly Houses, We’ll Buy Your House for Cash, Sell Your Home Fast for Cash.”
They are on TV, on billboards, online, come in the mail, and even on telephone poles and fences. They seem to offer a simple way to sell your home no matter its current condition. Some ads state that you won’t have to pay closing costs because they will. You won’t have to pay a commission to a real estate agent, or that you can close very quickly because they are paying cash. Sounds too good to be true.
The businesses and people behind these ads are investors who are looking for properties to buy, fix them up, and sell them for a profit. They target homeowners that are in financial distress or need to sell their homes quickly.
The big draw with these ads is that you will receive cash for your home. But you receive cash when you sell your home the conventional way, too.
The goal of such investor buyers isn’t to help the seller but to buy the property at the lowest possible price. Why? So that they can make the most profit when they sell the property.
To create their offer, they may start with
- The current market value of the home.
- The projected market value after renovations.
- Some other number based on the current condition of the home.
Then they subtract the following estimated costs
- Required repairs or renovation.
- Insurance, utilities, taxes, loan payments, and any other expenses required to maintain the home until it is ready to sell.
- Marketing and selling the renovated home including real estate commissions.
- Any other expenses they might incur.
Given those subtractions, especially the last one, means that the offer will probably be well below market value.
These types of sales can be fraught with problems. They can leave the seller responsible for the property even after closing. For example, transfer of the title may not occur until the renovated property is sold, or the seller has to pay off their mortgage from the proceeds of the sale. In a worst-case scenario, you may have difficulty determining whether the buyer is a legitimate business or a fraud.
Compare that to listing the home with a properly licensed and established real estate agent. The agent will help the homeowner price the home appropriately for the market. The proceeds of the sale will probably be higher than the cash offer even after paying the real estate commission. A real estate agent will also make sure that the transfer of title, the payoff of the mortgage and any other required documentation is completed promptly.
If you have decided to sell your home, slow down, and do your homework. Taking the time to do it right will help you get the best price for your home and put more money in your pocket.
Information provided by FoolProof.