Since the start of the coronavirus pandemic in 2020, home prices have sustained extremely-high prices due to a combination of a shortage of inventory, historically low mortgage rates, companies allowing employees to work remotely. In fact, HomeLight notes in their Top Agent Insights for Spring 2021 report that 53.5% of agents believe that a higher number of parents will look to relocate at the end of the school year, and 97% of agents believe that low interest rates will continue to drive home buying demand.
If you’re looking to take advantage of this sizzling market, you may be thinking of selling your home to an all-cash buyer since it appears to be quick and easy. Before doing that however, it’s important to understand how the process is different from the standard home sale process.
What is an all cash home sale?
The reason all-cash home sales move quickly is because the buyer is frequently a professional investment fund or home flipper. It’s analogous to selling your car to a dealership so you can offload it quickly. While selling your car to a dealer saves you the hassle of listing it on Craigslist, taking photos, meeting buyers for test drives, and more, you’ll make much less from the sale.
The three main types of professional investment home buyers include:
- Buy-and-hold investors: Purchase homes and convert them into rental properties. These buyers often have more flexible closing dates, and offer better pricing than home flippers.
- Home flippers: Buy homes in poorer condition, renovate them, and sell (ideally) at a profit. These buyers are looking for the best deals possible due to the amount of work they take on.
- iBuyers: Short for “instant buyer,” these buyers use automated systems to make offers on high quality homes. These systems often offer 98% of a home’s fair market value and charge around 7% to 10% plus the cost of repairs.
Although all cash home sales tend to be simpler than agent-based sales, you still need to keep your guard up, especially since real estate investors, unlike agents, do not need to be licensed. As a rule of thumb, avoid doing business with companies that require upfront payment, and only transact on reputable iBuyer platforms that vet prospective buyers.
Navigating the traditional home sale process
If you don’t absolutely need a rapid home sale, selling your home with the assistance of a real estate agent is a great way to sell your home for top dollar with relatively little effort on your end. Selling a home with a realtor is a great option for most home sellers because real estate agents are only paid on commission. They’re only successful if you’re successful.
When you work with an agent, they’ll provide invaluable insights on pricing your home, upgrades and enhancements that should be made, and how best to market your home on the web. While the traditional home buying process has more steps than an all cash sale, your real estate agent will handle the majority of the legwork, while you’ll benefit from a higher profit margin.