Are you looking for a cash offer on your home? Are you wondering how a cash offer on a home works? If so, you’ve come to the right place.
When it comes to the process of selling a house for cash, we’re experts. Selling your home for cash is different than a traditional sale, but it also tends to be much easier.
If you don’t believe it, keep reading. We’re going to break down every step that you need to know when it comes to handling a cash bid on a home.
The Process of Selling a House for Cash
There are several steps that you need to know about regarding a cash offer on a house. The lack of financing for the buyer changes some of the tasks that you need to complete as the seller.
Let’s break down everything you need to know so that you can be prepared to undertake an all-cash offer.
1. Sign the Contract
Once you’ve found someone to buy your property, you should start the process of going under contract. This will lock-in their offer, so you should make sure that this buyer is the one you want.
To “go under contract,” you should complete the Purchase and Sale Agreement Contract with the buyer that you’ve chosen to transfer the property to.
2. Acquire a Proof of Funds
Most sellers want to make sure that the buyer can actually afford the house that they’re making an all-cash offer on. This protects the seller and ensures that the buyer actually has what they say they have.
Usually, sellers require a certain percentage of what is referred to as “earnest money.” This one to two percent of the sale price is a way for the buyer to prove that they can come forth with money for the home. It can also serve as protection for the seller.
In addition, sellers usually require a bank statement, investment statement, or some other proof of funds. If you’re not comfortable with this process or don’t want to have to worry about forgeries, you should allow your real estate agent to take care of this part. They can help facilitate these affairs so that your sale is secure.
3. Handle Title and Escrow
Now, it’s time to figure out a few of the more final legalities that come with buying and selling a home: title and escrow. Depending on where you live, you or the buyer may complete this step. Nonetheless, it is an important step to take and one that should be taken seriously.
Whoever is handling this part of the sale should hire title and escrow companies. Note that one company may handle both the title and escrow processes.
If you’re wondering why you need these kinds of professionals, you should know that both play an important part in the buying and selling processes.
A title company completes the following tasks:
- Rechecking the property lines (and correcting them as needed)
- Checking for property liens, which are outstanding debts on the seller’s part
- Issuing title insurance
- Ensuring that ownership of the property truly changes
An escrow company completes the following tasks:
- Managing all of the closing documents
- Ensure and managing the transfer of funds from the buyer to the seller
- Completing the necessary legal paperwork for the sale
4. Start Home Inspection
It’s popular for buyers to have an inspection contingency with their offer on the house. This added peace to their offer protects them as the buyer.
An inspection contingency states that the buyer is going to pay to have an inspection done on the house. However, this means that they can make changes to the agreed-upon price if the inspector brings up a potential issue.
Sometimes, the buyer asks the seller to fix these issues, while – other times – the buyer asks for a decrease in the value of the sale so that they can have the funds to fix it themselves.
Once the inspection and all price negotiations are complete, it’s time to start closing.
5. Sign the Closing Documents
Whether you’re dealing with an all-cash offer or not, it’s pretty much a guarantee that you’ll have to comb through a hefty stack of documents. Even though it can be annoying, each piece of paper does have a purpose.
Let’s run through some of the documents you can expect to find while you’re closing a house sale.
- Final closing instructions. If you haven’t signed your final closing instructions yet, this is the time to do so. Sometimes, these are signed when opening your escrow account. This document details the tasks that your escrow company is responsible for completing.
- Statement of information. This document confirms that you are who you’re claiming to be.
- HUD-1 settlement statement. This document is extremely important as it details every single cent that is involved in the sale process. Keep it for your taxes and have a second eye double-check all of the information on the document.
- Certificate of title. By signing this document, you are verifying that you have the authority to sell the property.
- Title deed. The title deed is the piece of paper that officially transfers the ownership of the property to the buyer. However, it is not official until the courthouse records the document.
- Loan payoff statement. This document is meant for those who still have a mortgage active on the house that they’re selling. It states how much the seller has left on their mortgage on the day of closing.
- Mechanics lien. By signing this, you’re swearing that there are no existing liens (debts) for any property work that has been done on the home.
- Bill of sale. If there are any additional items that you’re including in the sale, these will be included in this document. For example, you’d detail any furniture you’re leaving in the house for the new owner in this document.
- Statement of closing costs. By signing this document, you’re saying that you’ve been told about all of the closing costs for the document and agree to them.
The Timeline for Closing an All-Cash Real Estate Offer
One of the greatest advantages of having an all-cash offer on your house is that you can close the deal much faster. For some sellers, this doesn’t matter, but – for others – it makes a big difference.
If you’re in a selling time crunch, we highly recommend that you sell your house fast via cash. If you’re not in a rush, the easier selling process that we previously detailed is still a great reason to consider taking an all-cash offer.
All-cash offers close faster because the deal doesn’t involve a lender. In fact, closing an all-cash deal could last as little as two weeks. For comparison, most other real estate deals take at least 30 days.
Most of this time is taken up by completing and verifying documents. It takes some time for both parties to complete documents and a legal third-party to run through them and verify them.
Overall, it still remains that all-cash offers are faster.
The Classification of an All-Cash Offer
The phrase “all-cash offer” is quite misleading. It’s actually illegal for anyone to buy a house with physical cash. However, people can buy a house using a cashier’s check or just transfer their money electronically from their bank.
The term “all-cash offer” refers to a situation in which someone buys a house outright, meaning without using any financing.
There are two kinds of people who you’ll commonly see buy homes outright in this way: single people and iBuyers.
Single individuals usually buy smaller houses. Therefore, they are more likely to be able to come up with the funds given the lower cost of these smaller houses.
iBuyers are real-estate investors. These financial professionals have the ability to rake up enough cash to buy homes outright. Usually, they will use the homes they buy as rental properties so that they can earn the money they spent back.
The advantage to going through an iBuyer is that you don’t have to actually list your home at all. An iBuyer will be able to review the basic details about your home online, produce the market value of your home, complete their own online assessment regarding your home, and give you an offer for your home using all of this data.
The Advantages of Going With All-Cash Offers
There are several advantages that come with using all-cash offers over any other offers you may receive on your home. Many people don’t know that all-cash offers are actually much easier than other offers.
Let’s talk about what makes all-cash offers easier to work with and how you can benefit from taking an all-cash offer yourself.
Cash Offers Don’t Require an Appraisal
Mortgage lendors require appraisals on the homes that they’re going to help finance. They don’t want to help finance a home that isn’t truly of the value that the seller says it is.
All-cash buyers don’t have this same requirement. In fact, a lot of all-cash buyers purposefully look for fixer uppers. However, this doesn’t mean that some all-cash buyers won’t ask for an appraisal.
Similarly to the mortgage lenders, the buyers just want to know that they’re paying a reasonable price for the home that they’re looking to buy.
Cash Offers Are Faster
We already mentioned the timeline for an all-cash offer as opposed to a normal offer, but we find it important to point the difference in timeline out as a major advantage to taking an all-cash offer.
If you’re trying to sell your home fast for monetary, personal, or other reasons, all-cash offers give you that ability. You may have a new job and need to move quickly. You may not be able to afford your mortgage and you need to downsize.
Whatever it is, you can have peace of mind knowing that your home will be sold in just a matter of a couple of weeks.
Cash Offers Are More Reliable
Because the buyer has to prove that they have the cash necessary to buy the home, cash offers are less likely to fall through. Sometimes, with mortgage-dependent buyers, the financing may fall through and the sale is null and void.
This can be a problem for someone who is trying to sell their home relatively quickly. The mortgage paperwork and approval process can take extra time and it’s not even guarantee that the deal will go through and finalize.
In fact, sometimes a seller will choose an all-cash offer, even if it’s less than someone who is financing is willing to pay. The convenience is worth the lesser amount of cash for some sellers.
Cash Offers Cost Less
Because there is less paperwork and less time devoted to this paperwork, cash offers cost less. This counts in both time and money, though.
All-cash offers don’t require as many fees or closing costs because there are fewer piece of paper to go through. You don’t have to worry about paying the bank’s numerous fees.
Plus, sometimes the seller opts not to use a real estate agent, cutting costs even more. A real estate agent isn’t necessary if the seller sells to an iBuyer.
In addition, cash offers cost less for the buyer because they don’t need to pay interest on the sale of the home at all.
It’s a win-win situation for both parties.
Finding an iBuyer to Buy Your Home
Now that you’ve gone through the process of selling a house for cash and looked into why this process is more timely and more financially conservative, it’s time to seriously consider taking an all-cash offer for the home you’re looking to sell. Whether it’s an individual buyer or an iBuyer, you’ll find that it’s a much faster and easier process.
If you’re interested in finding an iBuyer to sell your home to, you can depend on us here at iBuyer. You can find someone to buy your home quickly with us.
If you’re in a time crunch, you should seriously consider taking an all-cash offer. You’ll thank yourself when it’s over.