So, you put your house on the market. If you pick a good price for it, then you will be absolutely inundated with offers.
But even if you set an unreasonably high price, you are still likely to get some number of offers from real estate companies. Those companies deal in a certain way.
Whether your price is good or bad, some companies will offer to buy your home in cash. This does not mean that they will show up with a duffle bag full of dollar bills.
Rather, they will offer to pay the full price for your home all at once. This is quite the unique way of buying a home.
You see, if you were to buy a home, regardless of whether or not it was from an individual or a bank, you would likely get a loan to buy it.
You would then go on to pay off this loan for many years. The price of the home is adjusted to account for this.
The price of the home will usually be higher due to the fact that you are not buying it all at once. Many purchases work like this, basically operating off of the principle that “two in the bush are worth one in the hand”, to borrow a phrase. But the same works in reverse.
The Pros of Selling a House for Cash
The main pro to selling a house for cash is that it avoids some of the common pitfalls of real estate. To describe these, let’s imagine talk about what the “buyer” and “seller” of the house are negotiating when they are negotiating the trade of a home.
Selling for Cash Avoids Loan Risks
When a buyer is buying a house with a loan, there is a risk for the seller for a few reasons. The first and most obvious one is the fact that the seller does not get the money all at once.
The buyer may miss payments, declare bankruptcy, or in some other way become permanently unable to pay off the loan.
There is a secondary risk, however: Inflation working against your price.
Selling for Cash Avoids Inflation Problems
Imagine that you are selling a home and a buyer offers to make payments to you through installments. The total price of the home (using a made-up number) is $100,000. Because they are paying overtime though, they will pay you $105,000. That is 5% above the price you set.
The buyer promises to pay off the loan over the next two years. But here is the problem: Inflation increases by more than 5% in just one year.
That means you are actually losing value by making your home cost only 5% more to be paid over two years.
Inflation is not easy to predict, as while there are forces in the market to set it at certain rates, it can increase more (and never less) than that amount. As such, most payment plans will cause the home to cost more than 10% more—and sometimes up to 50% more.
Selling for Cash Means Selling to Certain Groups
We mentioned how the most likely groups to boy a home for cash are real estate companies. That is true; there are companies who are basically going through the United States using bots to automatically buy homes. They will pay in cash and rarely ever send a human to deal.
The pro to this is the fact that these groups are usually good for their money. They will pay completely, promptly, and without concern that their money is bad. But you can already see…
The Cons of Selling in Cash
…While dealing in cash has its advantages, there are some disadvantages as well. The most obvious ones come about when you are dealing with real estate companies.
Negotiating is Harder
This is true whether you are dealing with a real estate company or not, but it is extra true if you are dealing with a real estate company. Essentially, anyone willing to buy a home in cash will hold a lot of power in negotiation. There is no payment plan or flexible rate.
Payment in cash means that the buyer wants everything as-is. If you have improvements that should drive the price up, they can argue that they “aren’t paying for those”. Naturally, not all of these negotiation tactics stand up to scrutiny, so be prepared to respond to them.
Some Money is Dirty
We do not mean that the problem is that the money is physically dirty—though it probably is. We mean that if someone shows up to your front door with a wheelbarrow full of money, then you should be skeptical about whether or not it is real or the product of a library printer.
Records are Easier to Miss
Selling a home to someone with a payment plan will involve a ton of contract negotiation. In contrast to this, selling a home to someone in cash will be far easier, at the cost of good record keeping. A lot of important details and potential value can be missed in this quick action.
Basically, imagine you are negotiating the price of your home. The buyer offers you $100,000. But because they are comfortable offering you $100,000, you know that they probably have more than that. You push for $150,000. They accept.
But if you had been negotiating the contract in a longer form, you might have gotten evidence that they have $200,000. Or you might have remembered features of the home that could push its price even further. It is easier to miss this when negotiating in cash.
Conclusion
There are a lot of good reasons to sell your home for cash. The main issue you will usually face is actually the matter of maximizing the value of the home in that situation. So, even though you can expect to get a good sum of cash all at once, remember to negotiate.
To get some tips on negotiation, check us out here: https://www.teifkerealestate.com/we-buy-houses-austin/
