In 2018 three out of every ten home buyers made all-cash purchases. This accounts for 27.8% of all single-family home and condominium sales. Only 12.4% of the single-family homes and condominiums sold via cash transactions were distressed homes (bank-owned/foreclosures).
You may be wondering “What is a cash offer on a house and how can iBuyer.com help?” iBuyer stands for Instant Buyer.
The iBuyer process uses artificial intelligence (AI) to determine the value of your home. The iBuyer then uses algorithms to determine a valuation model (AVM) and provides you with an all-cash offer. The iBuyer then performs any necessary upgrades or repairs to the home and re-sells it.
Sound too good to be true? Read on to learn all you need to know about this new process so you can sell your home quickly and easily.
What Is a Cash Offer on a House?
When you receive an “all cash” offer it is in phrasing only. Why? Because money laundering in real estate is a problem in the United States.
Having a paper trail makes it easier and safer for you and the real estate company you deal with. Instead of showing up with a bag of currency, the transaction must be complete using either a cashier’s check or an electronic transfer.
When you receive a cash offer on a home it means that the person wants to purchase your home without using financing. Because there is no time spent waiting for the buyer to receive a mortgage, the process generally moves to the closing considerably faster.
Traditionally, cash sales were not used in the home purchase process and offers of this type were made under only specific circumstances, including:
- An investment company or individual investor had an interest in the property
- The buyer had funds from the sale of a prior home to use in making the purchase
- There was high competition for the property and a buyer had the means to stand out above the rest by making a cash offer
- The property was in need of numerous repairs and/or upgrades and was being bought as a fixer-upper or flip home.
- Retirees using their savings to avoid having to pay mortgage financing costs
- Wealthy buyers who have large amounts of cash on hand
If a potential buyer has the cash on hand they may offer a lower price to purchase because you get the bonus of a quick cash sale. In 2019 approximately 6.2% of homes sold were for the purpose of flipping. Those buyers are usually looking for a quick cash transaction.
The cash sale process does not require many of the traditional steps, such as an appraisal for the mortgage, waiting for approval on financing, and house inspections. Buyers may want a title search and title insurance, but the process will be faster. Closing may happen as soon as two weeks of the acceptance of the offer.
Cash Sales Do Not Need
There are often contingencies when using a traditional home sale process. This includes:
- Loan Contingency—provides the buyer with time to back out of the purchase if they are unable to obtain a mortgage
- Sale Contingency—provides the buyer with time to back out of the purchase if they are unable to secure a sale on their existing home
- Inspection Contingency—this may be shown as a “due diligence contingency” that allows the buyer a specified amount of time to have inspections performed on the home prior to the purchase
- Appraisal—required by a lender prior to approving a loan, with a cash sale and no mortgage the buyer may have an appraisal done, but it is not a requirement
- Closing—on a cash sale it is a faster and easier process, as there is no lender paperwork involved in the transaction
While the cash sale does remove a lot of obligations, there are some things that need to be done to ensure a smooth transfer of ownership.
Cash Sales Need
Though a much easier process, there are a couple of things buyers do need when making a cash purchase.
- Title and Escrow—a title and escrow company will need to handle the closing, but you will have the option of shopping around for a company of your choosing
- Usually, within a specific number of days, the buyer on a cash sale must provide proof that they have the financial means to make the purchase, usually done using a letter from the bank
The closing process is considerably faster, and there are also many benefits of making a cash offer when shopping for a property. This includes the fact that your credit score does not affect your ability to purchase the home, and you will not need to pay for a home appraisal.
Making a cash purchase does require you to have a significant amount of money available, and also eliminates your ability to use mortgage-related tax deductions.
Cash sales are the new, modern, online method of selling your home to potential buyers. Using state-of-the-art technology that uses data-based algorithms, it is easy to have the value of your home calculated digitally.
Potential iBuyers that purchase homes will offer you cash for your home. There are no showings, staging, open houses, upgrades, or repairs necessary. The offers are made without anyone setting foot inside your home.
While the fees may be slightly higher for the benefits of receiving a cash sale, you cannot deny the benefits. One thing to remember when making a virtual cash sale on your home is that the buyer is making assumptions that the home is of the quality and value portrayed online. If the home does not meet those assumptions the buyer may lower the cost they are willing to pay.
Online buying relies on timing and delaying an acceptance may affect the potential sale or change the offer. Prior to using this process, we welcome you to view our short video, 5 Things to Consider Before Submitting Your Request.
Though faster and easier, there are still steps that will be taken when you sell your home for cash.
Signing the Contract
You will need to sign a contract saying you will accept the buyer’s offer. This document is normally titled the Purchase and Sale Agreement.
Proof of Funds
The buyer must prove they have funds to make the purchase when using be using their own cash. This is so you as the seller have proof that the buyer has sufficient funds to complete the purchase.
This is usually accomplished by requesting a 1-2% deposit of earnest money and proof that they have the balance available. Proof may be as simple as a letter from their bank confirming they have the funds on hand.
Hiring a Title and Escrow Company
Either the buyer or seller will hire the title and escrow company. The title company makes sure all property lines are correct. They will verify there are no liens against the property, including legal liens, child support liens, and contractor liens.
The title company will issue title insurance and make sure that the property changes hands on the closing date. The escrow company will manage all the closing documents and complete all legal paperwork necessary for recording the sale.
Home inspections are not a requirement of a cash sale but sometimes done at the request of the buyer. It will likely depend on the purpose the buyer intends to use the home for and the condition it is in at the time of sale. If it is being purchased as a fixer-upper, there will likely be no inspection.
Reviewing and Signing the Closing Documents
The review and signing of closing documents is the final step in selling your home. Cash sales have fewer documents to sign than with a traditional mortgage, but there are still a number of items that require a signature for the transfer of property to take place:
- HUD-1 Statement is required by federal law and is a detailed accounting of all money in the transaction, including price, pay off balances, pro-rated taxes, pro-rated utility bills, and more
- Certificate of Title you sign swearing you have the legal right to sell the property
- Title deed is what transfers the home into the ownership of the buyer
- A loan payoff statement is necessary if you were carrying a mortgage on the home you are selling and shows the amount of money you owe the lender on closing day
- Mechanics Lien is a document you sign swearing there are no additional liens on your property
- Bill of Sale will list any special negotiations relative to the sale, including that certain item such as a backyard swing, washer and dryer, etc. are to be left in the home and are part of the transaction
- Statement of closing costs bears your signature stating you are in receipt of the notice on all closing costs and fees
- Statement of information bears your signature as verification that you are who you claim to be
The above will be prepared by the real estate agent. In addition to the above signatures, you will need to bring specific items with you to the closing.
Items You Need at the Closing
When you attend a closing on your property, you must take with you the following items:
- Your Identification—Driver’s License or State-Issued ID
- The deed to your home (if it is paid off)
- The keys to the home, garage door openers, cordless entry code numbers, and alarm system codes
- A cashier’s check or certified check for outstanding costs not covered by your proceeds, including payments for pro-rated taxes and utilities—your title company will advise you in advance of the amount you need to bring
Closings for a mortgage and cash sales are very similar. The difference is how you actually sell the home, whether a traditional listing format or through an iBuyer.com system online system.
Traditional House Sale v. iBuyer.com Sale
This is a quick glimpse of what you will deal with when selling your home using the traditional method. We will then provide you with the benefits of using iBuyer.com for that same sale.
Anyone who has bought or sold a home is familiar with the steps involved in the traditional process.
- Interview different agents to determine which best suits you and have experience
- Follow dealer recommendations for repairs and upgrades necessary to sell home
- Keep the house clean and staged for viewing
- Accommodate agent and potential buyer’s needs for showings and an open house
- Wait days or months for offers from potential buyers
- Wait for potential buyer’s financing to receive approval
- Waiting on inspections, and financing,
- Attend an agent/title company set closing time
According to the Realtors Confidence Index Survey October 2020 about 30% of traditional sales contracts suffer delays because of issues with the buyer obtaining financing, In addition to financing, 21% of sales counter delays were because of appraisal issues.
The same survey shows that traditional sales have a 12% termination of contracts because the buyer is unable to obtain financing. Termination occurs in 13% of sales contracts because of appraisal issues.
While most homeowners are familiar with the traditional method of selling their home, that is not necessarily the best way to go. Stepping into the modern world of home sales through iBuyer.com can make your life so much easier, as many satisfied clients have learned.
The first step in selling your home on iBuyer.com is to determine the market value of your home. This is a fast, free process you complete on our website. You will then learn what national iBuyers may pay for your house if you choose to sell.
- There is no need to do repairs or upgrades to the home
- No cleaning or staging of the home
- No showings or open houses
- Request iBuyer offers online
- Receive instant offers from your home from iBuyers
- Receive cash for your home “as is”
- No waiting for financing to receive approval
- Set closing date that works for you, times are flexible and fast
While not a process you are familiar with, this is the modern, fast, and easy way to sell your home. For more information, we suggest you check out the iBuyer Real Estate in 2020 Complete Guide.
We will walk you through the process of a fast home sale by helping you decide which iBuyer best fits your needs. We will make the connection and you will receive an offer. iBuyers include:
- Local iBuyers and investors
- Consumers who buy fast and direct
- National buyers who are located in your city
We provide you with costs upfront so you know what costs you will incur before you make the decision to sell.
Sell the Modern Way
Now that you know the answer to “What is a cash offer on a house?” we welcome you to check out the iBuyer Markets to learn what we have to offer when you are ready to sell your home.
With the ongoing problems with COVID-19, you want to conduct the listing and selling of your home in a safe manner. You do not want to list using the traditional manner and have strangers walking through your home for viewings or an open house.
iBuyer.com is a safe way to get your house on the market and receive cash for the sale. If you have any questions we welcome you to contact us for more information. Don’t hesitate, sell your home the modern way.