What is a cash house buyer?

What is a cash house buyer? is a question that is asked by people desiring to sell their house off-market, that is, without a realtor. It often refers to an investor of some sort who buys houses at a discount using cash or non-traditional bank loan financing. It is also used to describe wholesalers who may or may not actually buy the properties. If you are in contact with an ‘investor’ who is offering to buy your house for cash, please do your due diligence to understand if they are a cash house buyer or if they are a wholesaler (you can refer to article: How do I identify a wholesaler? How do I know if an offer is from a wholesaler?)

The general idea is that a cash buyer is someone who doesn’t need to go through the traditional mortgage application and approval process, who may be able to consummate the transaction much more quickly, and who may be able to buy the property in as-is condition and/or without or with limited inspections as a contingency to the transactions. They may ask “What is a cash house buyer?”.

What is a cash house buyer? And how does this compare to a traditional retail home buyer? Most commonly, a homeowner lists their house for sale with a realtor on the MLS and then accepts an offer from a buyer. Sometimes the buyer is paying cash and they may elect to waive inspection contingencies. This happens more frequently in a strong seller’s market and in competitive home sales where there is high demand for a specific property. The traditional retail buyer does not ask “What is a cash house buyer?”.

Most commonly, however, the retail buyer of a house has to apply for a loan/mortgage with a bank or credit union. They also have professional inspectors provide inspection reports of the house (generally), for pests, mold, radon, well & septic, water, and/or other specific inspections such as hiring a structural engineer to evaluate the foundation or major structural elements. Each of these elements potentially add time and/or risk from the seller’s perspective. For example, a cash house buyer may be able to get through the entire transaction within a 1-2 week period while someone applying for a mortgage will often require 4-8 weeks to get through the process for that same home. The sale may also be dependent on the lender’s approval of an appraisal of the home’s value. And depending on the loan type, the home may also be required to pass other criteria related to its condition before the lender will approve the loan.

As per the question of What is a cash house buyer?, some of the benefits of selling to a cash home buyer (an investor cash home buyer) can include:

  1. The cash home buyer is able to close quickly.
  2. The cash home buyer’s purchase is not dependent upon bank underwriting and approval (reduced risk of the sale falling through)
  3. Cash home buyers may conduct their own inspection of the house upfront and not hire a professional inspector (saving time and potentially further negotiations)
  4. Cash home buyers often buy houses in ‘as-is’ condition
  5. Cash home buyers can be creative with their price and terms to make a deal that works for both parties.
  6. Cash home buyers often buy houses with significant repairs required.
  7. Cash home buyers eliminate the open house and showing process from the sale.
  8. Closings are typically much shorter due to not having to sign all of the bank loan paperwork.

Some of the potential drawbacks to selling to an investor cash home buyer can include:

  1. You will have to sell at a discount (the investor has to buy at a sizeable discount in order to be able to purchase, hold, repair/improve, and sell the property and make a profit).
  2. You won’t have the exposure to the large pool of potential buyers that you would had you listed the house on the MLS with a realtor.
  3. The cash house buyer can still back out of the transaction for various reasons (if/as the purchase agreement allows).

Regardless of whether you sell directly to someone you know, a cash house buyer, through a wholesaler, or otherwise – it is always recommended that you work with a title company (in the state of Michigan). The title company will do the due diligence and take the necessary steps to ensure that clear title is passed from the seller to the buyer.

It is also a good idea to vet the cash house buyer. Here are some things to consider:

  1. First and foremost, are you really working with a cash house buyer or are you working with a wholesaler? If you aren’t sure, please refer to our article “How do I identify a wholesaler? How do I know if an offer is from a wholesaler?”
  2. Is this a legitimate cash house buyer company or a scammer? Some things to check might include:
    1. Do they have a website?
    2. Do they have a business registered with the state?
    3. Do they have customer reviews or video testimonials?
    4. Do they have a track record?
    5. Is there someone you can contact to get a 3rd party reference, such as a title company or realtor?
    6. Do they have proof of funds?

To recap, a professional cash house buyer who can sell my house fast Michigan is not the same as a retail house buyer who submits a cash offer for a house listed with a realtor on the MLS. A professional cash house buyer Kalamazoo will sell my house fast Kalamazoo. Same idea, but very different. If you have a very desirable house in show-ready condition in a desirable area or desirable neighborhood, you might just want to try listing on the MLS with a realtor. Who knows, that cash offer may be headed your way! That is, of course, if listing on the market and going through that sales process works for you.

Please refer to our learning library of articles and content for additional helpful information about selling your house on and off market!