Pros and Cons of Taking Cash Offers For Your House

What are the Pros and Cons of selling your house for cash and if you do sell it for cash, how do you do it the right way?

This video is extremely important for anyone who is looking to maximize the sale of their home with the least amount of effort and who might be considering accepting an offer from a cash investor. 

Maybe your house is in disrepair or just messy. 

Maybe you’re an Executor of a probate estate or an Administrator of a Trust or in a divorce and need to sell the family home and you want to sell it quickly. 

Maybe you’re someone who just doesn’t like the idea of hiring a real estate agent and just wants to get the home sold fast but without giving up a bunch of equity. 

If that’s you, continue reading or watch the above video all the way to the end because even if you only take the knowledge given, you’ll be able to keep way more equity than if you don’t.

Here we go.

There’s a difference between a genuine cash buyer and an investor with cash and while it seems simple enough, you need to be clear about the difference and what you need to look out for with each..  

The genuine cash buyer or Someone who is in the retail market to purchase their next home or a vacation home or maybe just a place for mom and just so happens to have all cash is not much different than the buyer who is getting a loan to purchase your home.

The only real difference is that the genuine cash buyer will be able to avoid the lending process which can sometimes eliminate the need for an appraisal and allow for a quicker closing if that’s what everyone wants. 

Avoiding the appraisal can be helpful in a steeply declining market but I can assure you most anyone who is ready to throw down a bag of cash from their savings is likely going to do their due diligence and they’re going to know the value of the property anyway or still have the appraisal even though they’re paying cash. 

These particular types of cash buyers are very far and few between and you’re lucky if you come across one but it’s not what we’re discussing here today.

The topic of our discussion today is dealing with Investor buyers.  

You know, the ones that are offering to buy your home for cash, close quickly (if you want) and take care of cleaning out the house so you don’t have to.

It doesn’t matter if they are a huge investor platform like, opendoor or offerpad or if they’re just a single individual just trying to build their real estate portfolio. The goal is the same.  Buy low, sell high.

This is and always will be the goal of every investor throughout history and on into the future.

Buy your house for a low price, turn around and re-sell it for a higher price.

Now don’t get me wrong, selling your house to a cash investor can actually be a great thing but only if you do it the right way.

Let’s look at the typical message these investors use to try to try to get you to willingly or sometimes unknowingly give away a good portion of your equity.

They’ll promote things like:

• ALL CASH OFFER
• NO REAL ESTATE COMMISSIONS
• NO CLOSING COSTS
• QUICK CLOSING
• LEAVE THE MESS BEHIND, WE’LL CLEAN IT UP
• MOVE WHEN YOU WANT
• WE’LL SPLIT THE EQUITY WITH YOU ONCE IT’S FIXED UP
• NO PESKY REAL ESTATE COMMISSIONS

These are all great hooks and have caused home sellers just like you to give away many many millions of dollars in equity and make you feel good about it.

I don’t know about you, I’m not happy freely giving up any money for any reason especially in our current economic situation. 

You just can’t afford to do that and I’m going to show you how they actually get away with it so if you do decide to go the cash offer route, you will be aware of their tricks and you’ll be able to keep yourself tens or even hundreds of thousands of dollars in equity.

So, how do they do this?  Here’s some of the tactics they’ll use.

#1 Cash Is King!

That is very true but not for you when it comes to selling your house.  

Think about it, the real estate market is built around leverage. 

When a person goes out and buys a home, almost always it’s purchased with a loan.  With these loans, buyers can leverage a mortgage by only having to come up with as little as 5% down or sometimes even less. 

And it’s only because of that leverage that people can purchase an average Orange County home for a million dollars. 

If that leverage was not available and we relied on the “cash is king” concept, we would still be selling 4 bedroom homes for $30,000 – $50,000.

Investors know that the only one that benefits from the Cash Offer promotion is themselves because as a culture we’ve always been told Cash Is King and as a result we will sell things for less than they’re worth if we can actually put cash in our pocket so that we know that we’re financially liquid. 

Consider this.  How many times have you tried to buy something, maybe a car, something at the swap meet or on Craigslist and you yourself have said or heard someone say, “how much will you take for cash?”  And the person on the receiving end almost always lets themselves be talked down by the lure of cash as if it has more value than the equivalent deposit made into their bank account. 

Yet home sellers fall for it all the time. 

But you realize that the investor will never show up like a mob boss with the mystical briefcase full of cash and hand it to you. 

It’s all handled via an escrow company by wires and money transfers and you’ll never actually see any green. Yet you just gave up a bunch of equity for the idea of receiving a cash offer. 

Now combine this tactic with some of the others we’ll discuss and you could be in trouble.

#2 No Closing Costs.

Whew, thank God. Closing costs suck. You hear this and you think to yourself, “You mean I don’t have to pay closing costs in order to sell my house to you?  That’s awesome.  That’s extra money I get to put in my pocket!”  WRONG

Just by having this simple little thought costs you tens of thousands of dollars or more.

Investors would have you believe that they are simply eliminating the closing costs of the transaction because they’re going to show up with a proverbial bag of cash to buy your home thereby eliminating the typical selling process and the associated closing costs. 

However, every single transaction in Southern California goes through the exact same process and as a result, has the same closing costs associated with the transaction.  There’s no avoiding it. 

So are they doing you a favor by paying the closing costs? 

They’d like you to think so but no, they’re just building it into the lowball offer they’re about to drop on you.  Did you know, in Orange County, closing costs hover usually around the 1-1.5% mark. The most I’ve ever seen is about 2% but rarely. 

So the investor would convince you to sell your house to them for 20, 30, 40% or more below what it’s actually worth in order for you to save 1% in closing costs.  It just doesn’t add up.  Does it?

#3 We Love Ugly Houses, We’ll Take Care Of The Mess

Yes cleaning out a house especially after you’ve lived there for decades can be overwhelming. 

I understand but let me tell you a story about this gentleman who was managing the sale of a home for a friend who had recently passed away as part of a Trust sale.

It wasn’t even his stuff he had to deal with so he was even less motivated to deal with it. 

We call this one the $118,000 dollar trip to the dump. 

There was a lot of clutter and the home was outdated. 

The person handling the sale was a professor at a university and was very busy.  He couldn’t spend his weekends going through and cleaning out a bunch of junk. 

So he called on an ad he heard about an investor who would buy for cash and you can even leave the mess.  This sounded really good to him. 

The investor came out and he met with the professor.  The investor was super friendly because, well, no one is going to work with a mean jerk. 

Anyway, the investor convinced the professor (a very smart guy) that an offer of $759,000 was very acceptable and appropriate and after all he wasn’t going to have to clean out the mess which was really important to him. 

The professor was very pleasantly surprised and felt like this was the best offer he was ever going to get.

The professor was one day away from signing that offer when someone that knew us insisted he call us before signing any paperwork.  So reluctantly he did. 

The end of the story was that we brought him another cash offer for $877,000 which was an increase of $118,000 more than what he already believed was the most he would ever get. 

I mean really… He was ready to give up $118,000 to avoid a trip to the dump. 

If I asked you to load up a truck and take it to the dump for $118.000 would you do it?  Of course you would yet sellers all over Orange County are accepting lowball offers because they’re being convinced a little work is worth more.

Oh by the way, he still never had to make a trip to the dump, we took care of it for him. 

Boy was he happy he called. 

This is a common story of sellers that we work with throughout Orange County who are getting much more than they expected just by giving us a call and we’d love for you to be one of those great stories.

#4 Sell As – Is No Repairs Necessary

Folks, this is another great hook they use and they’ll use your own embarrassment against you. 

They’ll take your emotions and they’ll squeeze them as hard as they can and possibly bring you to tears.  They’ll get you to say things like, “how did I ever let it get like this” and “I couldn’t bear having anyone see this house.” 

Every time you have an emotional response, it’s like cash register bells ringing after every sale. 

It is known by every investor out there that when people make emotional decisions, it’s usually the wrong one for them but the right one for the investor.  

So if you learn nothing else from this video, learn to keep your emotions in check. And keep in mind how many people live in homes that are not perfect.  You’re not alone.   

It’s kind of funny to me how people want a pristine, perfect house when they move in but it’s interesting to realize what people will live with after they’ve been there for a while. 

Usually there’s a ton of deferred maintenance, a variety of other repairs and just general wear and tear on the home that has gone ignored because it’s not that big of a deal and money is better spent somewhere else.  

That is of course until it comes time to sell.  

The thought of having a bunch of strangers and oh God your neighbors coming through your house and see what you’ve been living with is horrifying. 

So the idea of selling a home as-is for a whole lot less sounds very appealing but I can promise you.  You will get over it when you have an extra $50,000 in the bank and you’re nowhere near those people.  

Now I know you’d like to fix it up but all the repairs are expensive and who has the money for that?

But, I’ll bet you didn’t know that there’s a way for you to have your house totally or partially rehabbed or just cleaned up or a quick paint job with not a single dime out of your pocket up front? No Loans, No Credit Check, No Qualifying and you only pay for this work after the home sells.

Yeah it’s totally true and most people don’t realize it.  You get the house refreshed which gets you a whole lot more when you sell and you only pay after the home has sold.

But even if you don’t want to do any kind of fixing up, there’s still plenty of people out there who would happily purchase your home as-is for more than what a cash investor will give you.  

Feel free to reach out to me if you have questions about fixing up your house before you sell.

#5 We’ll split the equity with you after it sells!

This is a relatively new one and wow does it sound sweet.  In fact it’s one of my favorite ones on the creativity scale.

You lay there sleepless at night thinking that all you have to do is sell the house to the investor for cheap, let them put their money and their hard work into turning the home into a beautiful palace and re-sell it for a gagillion dollars so you can split the difference when it re-sells? 

It sounds too good to be true.

Again you’re right.  

OK, I’ll give you the super simple version.  The investor convinces you to sell to them the home for cheap because price doesn’t really matter since we’re splitting the profits right?  

But even if they spell it out in the documents they have you sign, you’ll eventually realize (usually after the sale) that the rehab costs used to calculate the work are not based on their actual cost of the work from their own staff (which is much less). 

It’s almost always based on retail pricing with all the standard markups.  So if their actual repair cost using their own staff and wholesale pricing for materials is $100,000, it’s probably going to translate closer to $175,000 – $200,000  at going market rate for those repairs. 

Well there goes a chunk of the equity. 

And then on top of that, they usually put an upper limit as the margin price that they need to reach before there’s any equity to split. 

I’ve seen this upper limit at actual full price essentially saying that you’re only splitting anything above full price. 

So to clarify, in the end while they might make a couple hundred thousand in profit, you might be lucky to walk away with an additional $10,000 – $20,000. 

Oh and don’t forget, they got you to give it to them for less than what another investor might have given you purely with the idea of you getting a big payday on the back end. 

So in the end you lost even more than you should have.

#6 No Pesky Real Estate Commissions.

This is the big whopper they use all the time simply because no one likes paying commissions.

But, wait a minute, they’re going to convince you that having to pay a pesky real estate agent up to 6% is worse than giving up 40% of your equity to them? 

Look, no one likes paying commissions and face it, real estate agents as a whole generally don’t have a great reputation. 

That is except for the ones who have actually adopted this industry as their life long career and have dedicated their heart and soul to the practice and the well being of their clients. 

But in general, there are way too many agents out there that are part time, inconsistent hobbyists that do a poor job and give a bad name to agents as a whole. 

And this makes the message of not having to pay commissions one that is really really appealing but in reality is the complete opposite and I’m not saying this because I’m an agent..

You see, the main reason they use this hook is because they know real estate agents get in the way of them hauling wheelbarrows full of cash, called your equity, down the street to their banks.

So they have to create that seed of doubt about real estate agents, even the professional ones.  They know when you list with an agent there’s no way an agent is going to let them steal your house.

But even more importantly, here’s the distinct difference you need to understand. 

The investor in no way shape or form actually works for you or your best interest in any way whatsoever. 

They are working solely for their best interest and will do everything to make you feel like they’re looking out for you because… it’s in their best interest when you get comfortable and hand over your equity. 

I’ve heard numerous stories like the one investor who bragged about how they convinced one lady to take tens of thousands less just by being kind and helping her do the dishes. 

Yet even the most intelligent people fall for it every day.

But assuming you find a super experienced, professional and proven real estate agent to represent you, remember, they very specifically work for you. 

And I don’t mean because they are just trying to get a higher price because they’ll get a higher commission, of course that’s the byproduct, but by law they are bound to look out for your best interest always and that proven agent can stand up to the investor and demand more. 

So Now What?

So how do you make sure you’re getting the most amount of money for your house no matter what? 

The answer is simple. You gotta get people fighting over your property whether it’s investors or retail buyers.  

And we do it very effectively by using a technique I equate to launching a new iPhone into the marketplace.

So to find out more about that and just have a casual conversation, schedule a private one on one call with me and we’ll decide if you’re better off selling to a high paying cash investor or getting the house ready to sell on the retail market with no upfront cost.

Since 1997 I’ve been helping people just like you get their home sold for absolute top dollar and standing in the way of other people who would take advantage of your situation and would steal tens of thousands and in some cases hundreds of thousands of dollars from you just because you don’t know any better. 

But I do. 

I’ve been an advocate for homeowners because I believe that real estate is one of the most valuable assets the average person can own to build wealth and you shouldn’t be giving away that wealth just because of convenience.  

Let me do the work and I’ll show you how we can win together.

Best part is there’s no obligation for you to get to know me. There’s no cost to have a conversation and if all this conversation did was give you more awareness about how to keep thousands when you sell then it will be time well spent.

Call or Text Anytime. 714-900-2710

I look forward to talking to you very soon.