Selling properties for cash-to-cash homebuyers is increasingly becoming a preferred option for most homeowners. For some, this is a perfect option to sell their homes quickly. Others don’t want to spend more time and effort preparing their homes, which involves making repairs, upgrades, and staging before sale.
If you are among the many homeowners who are uncertain about how long it will take to sell your house in Memphis, you should consider cash offers. You will sell your home quickly at reduced costs and with little stress. However, being a new trend, there’s a lot to know about cash homebuyers. Below are a few interesting facts you should know about this new real estate trend.
1. Prevalence for Cash Offers Vary
While you may not know friends or family members who paid all cash for their homes, you will most likely receive a cash offer if you list your home for sale now. Cash sales remain strong, even as the real estate market recovers from the low housing inventory and soaring mortgage rates. However, the percentage of cash offers rises and falls depending on various economic patterns. Specifically, the percentage of cash offers in your city depends on various variables, including:
- Location, climate, and affordability: Some real estate markets have an increase in cash offers driven by the active relocation of remote workers from expensive to cheaper areas. Such buyers use proceeds from their previous home sale to pay all cash for a home in a cheaper market.
- Wealth of local buyer pool: The COVID pandemic led to unusual migration patterns and skewed cash sales in areas with affordable housing. However, luxury homes in costly areas still sell for cash, depending on the wealth of the buyer pool. A business insider report found that the wealthiest millennials, who comprise the largest pool of homebuyers, prefer coastal states.
- An increase in investment activities: While there’s an increase in cash offers, close to 78% of individual buyers require financing when buying homes. However, investors ranging from house flippers, iBuyers, and buy-and-hold investors prefer paying cash. A high volume of investors looking to buy properties as-is drives cash purchases. These investors renovate and sell these properties at a profit.
2. Cash Offers Have Bargaining Power
Bargaining and negotiations were not possible in the conventional home selling process, as appraisals determined the value of your property. However, you can negotiate cash offers from various interested cash homebuyers. The only challenge is knowing how to negotiate to get a fair price for your home.
Ideally, you should hold an upper position when quoting your price. However, this requires that you consider several factors, especially the status of your property and market conditions. That said, you can negotiate better by being firm on your bottom line, creating a bidding war, and focusing on other benefits of cash offers. Similarly, you should fall for high-pressure tactics.
3. Cash Offers Have No Appraisal Requirement
Selling your home to mortgaged buyers always requires a home appraisal to know your home’s worth. Lenders must appraise the property to reduce their financial risk if the home goes to foreclosure. However, cash homebuyers don’t depend on lenders, which voids appraisal requirements. Ideally, there is no legal need for an appraisal for cash buyers. However, buyers may decide to have the property appraised even if they won’t apply for traditional financing.
4. Cash Buyers Should Show Proof of Funds
While not as complicated as being approved for a mortgage, cash homebuyers should show proof of funds for their offer to stick. Proof of funds is a document demonstrating that the potential buyer or entity has enough money to complete the purchase.
Cash homebuyers can present several documents as proof of funds. In some cases, a printed bank statement of their accounts is enough. However, home sellers may request certified financial statements or a copy of their money market account balance. Regardless of the statement, the money should be liquid for the cash homebuyer to qualify. This means mutual funds, life insurance, bonds, or third-party bank accounts cannot be used as POFs.
5. Cash Buyers Can Make an Offer to Any House
Among the many benefits of cash purchases over mortgaged buyers is the ability to make offers on any property. Cash buyers are welcome anywhere, unlike some types of mortgages, especially USDA and FHA loans, which restrict buyers from going for properties in certain locations or conditions.
This benefit stems from the fact that cash homebuyers don’t rely on mortgages to close the sale. Without the inconvenience of waiting for mortgage approval, cash buyers can make offers on the spot. Cash offers don’t rely on appraisal contingency, allowing them to make offers based on their valuations.
There is a lot to decide on when planning to sell your home. For starters, you should choose between selling to cash or financed homebuyers. Cash homebuyers are a great option if your sale is restricted to a timeline. Cash offers also have other benefits to property sellers. However, you should understand the intrigues of cash offers before proceeding with the sale.