There are countless benefits to receiving a cash offer on your house. A legitimate cash offer is more reliable than an offer that is attached to financing. With far less that can go wrong on the road to closing and the ability to get there faster, it’s no wonder that sellers celebrate when they receive one.
A cash offer may come from a variety of sources. But whether you are reviewing an offer from real estate home buyers with cash, a corporation, or an individual or family, it is always a good idea to ensure the offer is legit because, unfortunately, cash offer scams do exist.
As you consider your cash offer, keep an eye out for the following signs that will help ensure you only accept legitimate offers on your home.
1. The Offer is Reasonable
If something seems too good to be true, it likely is. If someone makes an extremely high offer for your home, it should definitely raise some red flags. People are unwilling to pay more than a home is worth, especially if it needs extensive repairs. Occasionally, when the market is hot, you might see buyers offering above the asking price on a home. But even those offers will still fall into a reasonable range. If you receive a surprisingly high offer on your home, it often indicates something suspicious.
A home appraisal will give you a reasonable estimate of its value. Any legitimate offer will be somewhere in the ballpark of that number. Will eager buyers offer more under certain conditions? Sometimes, but it will still be within a stone’s throw of the market value.
2. The Offer Comes From a Legitimate Investor
If you receive a cash offer on your home from an investor or a corporation, some internet sleuthing will help you determine if it comes from a reliable source. These types of offers should always come from someone reputable.
It is reasonable to be wary of cash offers, but with a bit of research, you can feel pretty good about moving forward with that offer. If your Google search shows a positive internet presence for the buyer, you can feel optimistic about selling them your home. Conversely, be cautious if you can’t dig up any info on the investment company or the offer comes from someone overseas making a sight-unseen offer.
3. The Investor Rates High with the BBB
A surefire way to vet a real estate investment company is by visiting the Better Business Bureau (BBB) website. Real Estate Investors with a high rating with the BBB are proven to be reputable and legitimate.
Once you get to the Better Business Bureau website, you can search for any company you intend to do business with. Positive ratings on the BBB will give you the green light to move forward, while poor ratings or the absence of a presence on the site should give you some pause.
4. The Offer is As-Is
If someone offers you cash for your home, it generally indicates they are happy with you selling your house as-is. While a traditional buyer may want some additional protections like inspections or appraisals, they aren’t expecting you to make repairs or updates to the home before they sell.
An investment company will assess your property to determine a fair value, assuming that they will perform all repairs after the sale closes. As a seller, a cash offer should indicate you are off the hook for sinking any more money into the house. If the offer indicates otherwise, you may want to investigate further.
5. There Are No Excessive Fees
A real estate investment company with the cash to buy your home does not need to charge you fees along the way. Hidden fees that come up before closing are often the sign of a scam, where fake investors will offer cash, collect a bunch of fees, and then disappear before the sale is complete. Any legitimate fees will shake out during the closing process and do not need to be paid directly to an investor as you prepare for the sale.
A Good Way to Estimate a Reasonable Cash Offer
You need to know your home’s approximate value to make reasonable decisions regarding the sale. If you have a home in good shape in a seller’s market, it might receive a market-value cash offer. You can get a good idea of the number by watching other homes for sale in your area or getting an appraisal on your home.
If you sell a home that needs repairs and upgrades to a real estate investor, you can expect a below-market value offer. The investment needs to make a profit from the time and money they put into fixing it up. Therefore, you shouldn’t expect an overly high offer from an investment company.
Many investors use the 70% rule to calculate their offer, giving you a general idea of what to expect. Sales Price x 0.7 – the cost of renovations.
For example, if an investor plans to update your home so it can sell for $400,000 and anticipates spending $50,000 to do this, they will make an offer that looks something like this: $400,000×0.7-50,000= $230,000 offer.
While it’s not an exact science, it will give you a ballpark range to help you identify if the offer on the table is fair.
If you have a legitimate cash offer on your home, congratulations! You are on your way to new beginnings and can anticipate a quick and easy sale.