What Does Cash Only Mean In Real Estate?
If you've been stumbling around the real estate market for a while, whether you're looking to purchase or sell a home, you may have heard of an offer that says "Cash only". Keep scrolling if you're interested in learning more about cash-only offers or if you're interested in buying or selling a house for cash.
What does it mean when you receive a “ Cash-Only” offer?
This is a no-brainer. Cash only means exactly what it says. It is an offer that the seller receives from a buyer with a condition that the transaction will happen with cash only and no other financing options would be permitted. Usually when the seller has a lot of cash available or when the buyer has a faulty property that has been on the listing websites for too long, they use the cash-only option.
When can you expect to receive a cash offer?
Cash offers are usually offered by wealthy individual buyers, individual investors, organizational investors and home buying companies. Usually, these people are the only ones who have a lot of personal funds or cash to buy a property in all cash. Most of them see your property as an investment. Buying a property for cash saves a lot of money for the buyer, and hence they get a chance to increase the margin and earn a good profit.
Understanding the meaning of cash-only is not the difficult part. The real challenge is determining whether or not it is a feasible option for you and if it is, how can you exactly make it happen? Buying and selling in cash have perks and downsides for both buyers and sellers. In order to decide whether or not you should accept the cash-only offer you received, let's look at some pros and cons of selling and buying a cash-only property.
Pros of selling a house for cash
It is fast
When you sell a house the traditional way, it will take you several months, if not years, to actually close the deal. Starting with the listing of the property and finishing with a lot of paperwork, the procedure is highly methodical and time-consuming. A cash deal is your best option if you don't have the luxury of taking your time to sell your house. Cash deals happen within a week or two. So if you are in need of some funds as soon as possible, then a cash sale is your best bet.
Get Cash ASAP
Imagine you suddenly have a huge medical bill and your personal fund is not sufficient to pay it back. Loans might take a lot of time and they come with an interest rate. You can sell some pricey things, but it may not be sufficient to cover the large amount. Selling your house is your ultimate bet. Selling a house for cash can give you a large sum of money immediately, allowing you to take care of your monetary needs as soon as possible.
Cash buyers like an investor or home buying companies don’t mind buying a house as-is. This means you don’t need to spend your time and money on conducting an inspection and then making repairs and revamps to your house to make it ready for sale.
Avoid extra expenses
There are many extra expenses that you will have to deal with if you sell your house to a buyer by other financial means. Here are some extra expenses can be exempted from if you approach a cash buyer for your home sale:
Home inspector’s fees
Fees of the buyer’s and seller’s agent
Fees of professional staging experts and photographers
Cost of repairing minor and major damages
When working with a cash buyer, you will need to prepare significantly less documentation at the conclusion of the transaction than you would if you were selling your home to a traditional buyer.
Marketing is not a necessity
You don’t need to attend a marketing 101 class to ensure your listing is visible to the target audience. If you have decided to sell to a cash-only buyer you can take help from your network or a real-estate king in your friend circle to reach out to people who might be interested in paying cash for your property. If you are seeking investors you can look for them online or meet them at auctions. There are also some investor organizations, you might reach out to them as well. In a nutshell, you don’t need to market your house since your market is very specific and small. Just reach out to people who usually do buy houses for cash and you should be able to find a good deal.
Don’t need to prepare for a house tour
The lengthiest part of the home selling process is meeting buyers and allowing them to tour your house. Home sellers take help from staging experts to stage the house for the tour. Your house needs to look really attractive to the buyer. You can skip all this hassle because most cash buyers don’t really buy houses in cash to stay there. They are only eyeing your property for investment so whether your house has fresh paint or not is none of their concerns. Some cash buyers also offer a deal without visiting the site at all.
Cons of selling a house for cash
Lower Selling Price
Cash sales usually happen at a price below the fair market value. Not always but in most cases. Since most buyers will buy your house as-is and pay you immediately in cash, it is quite fair for them to propose a lower asking price. So now you have to make a decision whether or not is it okay to lower the price to enjoy the speed at which the transaction will be completed. If you are not in much hurry to sell out your property, then you can go by the traditional method and relish a good profit.
Cash-only properties usually have less competition since the buyer market is very small. Since there aren’t many cash buyers you might not get many offers to compare and decide. So you will be left with one offer which in most cases would be non-negotiable, and you have to take a call whether or not to call this a deal.
You’ll be working with non-licensed individuals
One thing you need to know is that investors are not licensed people like real estate agents. They don’t need to have a license because in a broader sense they are nothing but buyers.
Might end up with a scammer
Scammers in the real estate industry are very crafty. They are quick to find people with urgent needs of funds and are less knowledgeable about the legalities of real estate. It is always a good idea to do a considerable amount of research before signing any documents with a buyer. Additionally, you can take help from an experienced seller in your circle to keep things more secure.
How to sell a house for Cash?
First thing is that you will not find your potential buyers on listing websites so it's pointless listing your house. So where exactly can you find an all-cash buyer?
Usually, these buyers would be on the lookout for properties like yours. So you can expect an offer coming your way rather than you hunting for a buyer. If not, you can approach these buyers through your network or by contacting an investor organization.
What is the place where you can find many cash buyers at the same place?
A real estate auction!
Attend an auction, and meet up with the buyers there. You should expect a positive response because these buyers are looking for properties they can buy in cash and are also capable of providing that much cash to you.
Pros of buying a house with cash
Buy houses at a cheaper price
Buyers prefer buying a house in cash because it lets them buy a property at a lower price. If you buy the house as-is you can lower the price even further. This same house can be renovated and then sold for a very high price to earn the margin. Alternatively, you could even make it a rental property and earn your share.
Become the owner quickly
As we said earlier, you don’t need to go full circle to buy a house. It is as simple as buying stuff from a store but with documentation and a goal to make good investments.
You’ll stand out from the crowd
There is very high competition in the real estate market. Both the buyer and the seller are trying their best to stand out from the crowd and reach the right person. With an all-cash offer which is usually very tempting to the sellers, you’ll certainly stand out from the crowd.
No need to pay interest for the rest of your life
Buying a house with a mortgage is quite stressful. You’ll first need to find a mortgage lender who is willing to lend you money. Secondly, you have to spend a considerable amount of time after the buying process repaying the loan. On the other hand, if you pay cash you can get rid of the stressful loan repayment process and also save a lot of money that would have been spent on interest.
Buying a house has a lot of extra expenses associated with it. You can reduce the amount considerably by doing a cash transaction. You can save up on closing costs, documentation fee and even paying the interest rate if you go all cash.
Cons of buying a house with cash
Buyer’s financing falling
Buying a house is a very big deal for most of us, why? Because it costs a LOT! Buying a property in all cash can narrow your available cash. If you are in need of some cash suddenly you may or may not have funds available. You certainly do have a choice of reselling the house in cash and meeting your monetary needs but, your margin might not be as high as it would have been if the reselling was done with meticulous planning.
Mortgage tax deductions
All of us pay taxes, however, if you were repaying a loan, your tax amount would be subtracted in accordance with your interest rate. Cash buyers don’t get a chance to enjoy such tax deductions.
Investing the purchase amount might give you a better profit
Investing the money you spent on buying a house might actually give you more profit. It isn’t really a disadvantage but you are left out of a great investment opportunity. However, this isn’t always the case. Some buys can prove to be very advantageous and can help you earn a lot of profit.
How to buy a house in cash?
Buying with cash doesn’t mean that you'll be packing loads of money in a silver suitcase and then handing it over to the buyer. Nobody has so much hard money with them. But there are other alternatives like certified funds.
Another option you have is a hard money loan. A loan with real estate as security is known as a hard money loan. This is usually everyone's final option to acquire funds. These loans are usually provided by rich people or businesses rather than banks, and they are typically employed in real estate transactions. The time of repayment is also less in these types of loans.
Since now you are aware of the pros and cons of being an all-cash buyer and seller, you are probably in a better position to make a better choice. Still, let me help you out.
As a buyer, you have to think about two things-
a) Is the property investment-worthy?
b) Will you have enough funds to deal with your life after buying the house?
An answer to these two questions should be enough to help you make a decision.
For sellers who have received a cash-only offer-
Consider whether the lesser price you are offered is worth the quickness of the process. If you are not in an emergency situation, please analyze the offer carefully before accepting it.
Despite what you decide, we urge you to do a considerable amount of research to save yourself from scammers. If you know someone who is real estate savvy, make sure to take their help.