From this article, you will learn how “we buy houses” companies work and what dealing with them looks like.
We will explore the various types of cash home buyers, their nuances, and what working with a cash home buying company can mean for a seller’s bottom line.
Let’s look at the nuts and bolts.
How Selling to Cash Home Buyers Works in a Nutshell
Selling your home for cash is usually simpler than a traditional listing, but it still follows a defined process. So, how do “we buy houses for cash” companies work? Most follow four main steps.
Selling Process
1. Requesting an offer
Usually, the process begins with a short online questionnaire. That’s where you’ll share essential information about your property like its size, location, age, and current condition.
Sometimes you can even upload photos or videos.
You’ll typically hear back within a day of submitting the information. The investor will want to set up an in-person visit.
2. Meeting an investor for a walkthrough
During a walkthrough, the investor will verify the information you provided, identify necessary repairs, and estimate the potential cost to complete them.
Although their visit is an informal visual assessment, it’s usually enough to make the offer. However, they may request a specialty inspection if they have significant concerns.
These include structural or safety problems such as foundation damage, mold, high radon levels, or termite infestation.
3. Accepting an offer
Most buyers send an offer within 3 days of finishing the walkthrough. When the offer is in your hands, you can look it over and decide if it fits your goals.
If you’re happy with the price and terms, signing the purchase agreement confirms your acceptance. Otherwise, you can negotiate it.
4. Closing
After you accept the offer, the process moves toward closing. The buyer takes care of the title search and prepares closing documents.
Issues with the title or liens can sometimes surface while they handle these details. If that happens, additional steps may be required before closing.
The investor may lend a hand at sorting things out to keep the deal moving.
While the steps outlined above give you a general idea of what’s involved, the exact process can vary depending on the type of company you work with.
We’ll take a closer look at these differences later in the article.
Pros and Cons
Like any real estate transaction, selling to a cash home buyer comes with trade-offs. The following provides a quick look at both sides.
Pros
- One of the biggest advantages is speed. Traditional sales can take a couple of months or more to finalize. Cash buyers usually close in under a month, often in about 2 weeks.
- You can also sell the property as-is, even if it needs work, has outdated features, or is cluttered. There’s no need to pour money or time into repairs, updates, or staging the home for sale.
- A cash offer also eliminates the uncertainty and delays that come with bank financing. With no need for an appraisal, inspection, or lender approval, there’s far less chance the deal may collapse. You don’t have to wait weeks to find out if the mortgage is approved or denied, either.
- You’ll also skip paying a Realtor commission, which usually runs 2.5% to 6% of the sale price (however, iBuyer companies charge a service fee similar to an agent fee, which we’ll discuss later).
- Another perk is that many cash home buyers absorb closing costs. That spares you another expense.
Cons
- A key drawback is the offer price. Cash buyers factor repairs, holding costs, and profit into their numbers. That usually results in a lower offer than a traditional sale may bring.
- You’re also going without a professional representation Realtors offer. That means there’s no one negotiating for your best interests, advising on disclosures, price, or thoroughly reviewing contract details.
Do Cash Buyers Really Buy for Cash?
Many sellers wonder how cash home buyers work when it comes to funding offers.
Some do have cash on hand. Many others depend on specialized short-term investor financing known as hard money loans.
Experienced investors can often secure these funds in as little as 1 to 3 days. That’s far faster than a few weeks for a buyer to get a traditional mortgage.
Funding is typically fast, but not instant. That’s why investors getting these loans don’t make an offer on the spot after viewing a property.
They analyze numbers, present them to the hard money lender, and get approved before making an offer.
Even though a hard money loan feels like an all-cash offer on a house, it’s actually financing.
Understanding this distinction helps you set realistic expectations and plan your next steps. It also provides insight into how to get a cash offer on a house that meets your goals and timeline.
True Cash House Buyers
True cash home buyers are legit companies that purchase property directly and take ownership themselves after handling the entire transaction.
Their end goal is to renovate and resell the property or keep it as a rental.
Whether the purchase is made with available cash or fast hard money financing, sellers benefit from a higher certainty of closing because these buyers are the actual purchasers and fully committed to the deal.
The sales process is typically straightforward and generally follows the same steps outlined earlier.
The pros & cons of a cash offer on a house from one of these companies also closely resemble what was discussed previously.
Real Estate Wholesalers
Not all companies calling themselves cash buyers are true cash buyers. Some are wholesalers.
They don’t plan to buy your property directly. Instead, they put it under contract and make money in one of two ways.
With a contract assignment, they transfer the purchase rights to another investor who closes the deal. The wholesaler gets a fee for arranging it.
With a double closing, they buy the property and then quickly resell it to the actual end buyer for a higher price. Closings are closely timed — within 1-3 days.
Wholesaling is legitimate when the middleman role is disclosed. Problems arise when it isn’t.
You think you’re selling your house to a cash buyer, and technically you are, but not directly.
You’ll surely get less money if you sold your house directly to the same investor, without the wholesaler involved. However, you’d have to find the investor without the wholesaler’s help.
Another inconvenience is that when dealing with a wholesaler, they can show your property to multiple investors.
First, the wholesaler will do a walkthrough. But then, there will be investors whom the wholesaler will try to get interested. If no investor likes the deal, your time is wasted.
This lack of transparency not only causes frustration. It’s unethical and can also fall under “we’ll buy your house for cash” scams, misleading sellers about who is actually buying and how much they will net.
iBuyers
iBuyers combine technology and real estate to quickly make cash offers on homes. Just like with other cash buyers, selling to an iBuyer starts when you submit property details online.
Unlike most cash buyers who do walkthroughs first, iBuyers often provide an initial sight-unseen offer based on their information about the local market.
But then, sellers have an in-person walkthrough, after which the iBuyer typically lowers the offer, justifying it by necessary repairs, and presents a firm, final proposal.
If you read reviews about iBuyer companies, you will find quite a few complaints where clients say that the discount for necessary repairs was unreasonable.
On top of that, iBuyers commonly charge a service fee, which is close to a Realtor commission.
As for how long a cash buyer house sale takes when dealing with iBuyers, it’s basically the same as with local investors — usually under a month.
How Much Do ‘We Buy Houses’ Companies Pay You?
When selling a home to an investor vs with a realtor, the offer is usually based on a formula called the “70% rule”.
It works relatively simply. Investors start with what your home would likely sell for once it’s all fixed up. That’s the after repair value (ARV).
Next, they take 70% of that figure and reduce it by the costs they expect to spend on repairs. This way, they get the maximum amount they can offer for your property.
As an example:
- ARV: $250,000
- Repair costs: $40,000
Maximum offer: $250,000 * 70% – $40,000 = $135,000
If an investor pays your closing costs as well, they will subtract them from the offer, too. What’s left is how much an investor will pay for your house.
For sellers, the downside is that the offer usually comes in under market value. But that trade-off can be balanced by the benefits of cash home buyers, such as speed, convenience, and an as-is sale.
Where to Find an Ethical Cash Buyer?
When selling your home, finding a trustworthy cash buyer shouldn’t be an added stressful step. We’ve made the process simple.
Our platform links you with a network of vetted investors that spans the entire country. They’re ready to make fair offers and close fast.
Request cash offers on your property with just a few clicks. Then, you can review them side by side to find the right fit.
You’re not locked into anything. There’s no obligation ever, and you don’t pay any fees for requesting, accepting, or rejecting any offers. Accept the best offer or walk away from them all — the choice is yours.
Our goal is to help you find ethical “we buy houses companies” near you so you can sell without surprises or hassles.
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