Are “Cash for Home” Offers a Scam?
If you’ve ever seen a Cash-for-Home sign posted in your city, or a website offering cash for your property, you may have wondered if this idea is worth entertaining. Indeed, many of these money offers are legitimate, but following one of them means that you are much easier to cheat and you will probably get a worse deal than what you would get on the open market.
How home cash offers jobs
There are a wide range of cash buyers looking to buy your home, from sketchy speculators plastering cheap “we buy houses” signs in disadvantaged areas to legitimate online companies known as iBuyers (Opendoor, Offerpad, Zillow and Redfin) of large players) who make proposals based on algorithms that calculate the value of your home. Some may even buy your home unnoticed, with some unexpected inspection costs. The market is also growing – according to the National Association of Realtors (NAR), cash buyers accounted for 15% of home sales in July 2020, up 11% from a year earlier.
Cash bids are based on a variety of factors, including comparable sales, renovations needed, area of property, and your mortgage size. The bottom line is that the offer will be less than the fair market value of your home. Generally speaking, iBuyers will cost closer to 98% of your home’s value, but more dubious cash buyers will be much less. These companies will tell you that you are actually saving money by avoiding real estate commissions, but research shows that homes tend to sell for more when you hire a realtor .
Why would anyone sell for less than their house is worth?
Speed and convenience. The average time for a sale to close is 47 days , but cash purchases can be made in as little as a week. Plus, you don’t have to worry about staging, hiring a listing agent, or the uncertainty surrounding listing your home on the market.
Homeowners who sell their homes for cash are often foreclosed or have homes in need of repairs that they cannot afford. Fast-pay offers often do not carry out checks, making it easier to sell an old, dilapidated home. If the offer is close to the market value of the property, this can be a convenient option.
Disadvantages of money transactions
The biggest blow against cash traders is that the worst of them prey on vulnerable people facing financial hardship as a result of bankruptcy, death, or loss of income. Since cash buyers are not required to be licensed as real estate agents, the space is filled with unscrupulous negotiators who take advantage of homeowners desperate for short-term cash.
Many people use aggressive selling techniques, such as tricking you into revealing your mortgage balance and using that number as the basis for a low supply. Other examples are hidden fees or last-second changes to the sales contract after you set the price. Without a licensed agent, you will defend against this tactic.
How to protect yourself
Information is power. Get an idea of how much your home is worth, ideally through a proper home appraisal or by asking a local real estate agent for a comparative market analysis (CMA) for little or no cost.
Study the buyer making the offer carefully. Are they from a reputable company with a good rating from the Better Business Bureau? Beware of potential buyers who don’t have a proper website or company logos on their signs or have limited contact information. Just walk away if the buyer seems unreliable.