If you’ve been thinking of putting your home on the market today, you’ve probably seen advertisements for companies that proclaim to purchase homes for all-cash offers in short amounts of time. While these companies making hefty offers so soon may seem odd, the fact of the matter is that the housing market is extremely tight, and as HomeLight reports in their Top Agent Insights report for Spring 2021, only 10% of real estate agents believe that inventory will meet the pent up demand of today’s homebuyers.
Low inventory combined with historically low interest rates (which 97% of agents believe contribute to increased demand) is fueling bidding wars, meaning now is a great time to sell your home. Those facts in mind, we’ve put together the information below to help you understand your options for selling a home.
How do house-buying companies work?
House-buying companies, as the name implies, are businesses that focus on buying properties from homeowners. The main types of house-buying companies include house flippers, buy-and-hold companies, iBuyers, and trade-in companies.
House flippers and buy-and-hold companies are similar in that they look to purchase properties at a discount (due to needed repairs or rehabilitation), however, house flippers look to make the required repairs and then sell for a profit. Buy-and-hold companies on the other hand make needed repairs and improvements however they look to profit from renting the property to tenants.
iBuyers are businesses that rely on machine algorithms to calculate offers on properties, sight unseen. Unlike hose flippers, iBuyers typically look for properties that require minimal renovations. These solutions tend to be fee-based, meaning that the offer will be close to the home’s market value, however, a sales fee will apply (often 6% to 7%).
The final major type of house buying company are trade-in companies. These companies frequently purchase a home on behalf of the homeowner using the original home as collateral, and then allowing them to rent the property back while purchasing their new home.
What are the risks of selling your home for cash?
While selling your home for cash is frequently quick and convenient, the process is sometimes risky because you’re bypassing the traditional home selling process. A common scam in the real estate space is a bait and switch where the buyer will claim to write up an agreement based on what was discussed verbally, however the agreement they write will have different terms, easily overlooked by sellers that who are looking to quickly make a sale.
A common thread of all-cash home sale scams is the buyer will leverage the sense of urgency which often causes finer details to be overlooked. Fortunately it’s easy to minimize the risks associated with selling your home for cash by taking simple precautions such as using a reputable homeselling marketplace which helps facilitate the transaction for you and provide assistance should an issue occur.
Another option to minimize risk is to have a trusted real estate expert review all paperwork associated with the sale. Although this involves extra costs, it provides peace of mind that you won’t fall victim to a scammer.