What Types of Properties Get the Best Cash Offers?

What Types of Properties Get the Best Cash Offers?

If you have a property, you no longer want or need, the fastest way to get rid of it is to get a cash offer from an interested buyer. This might be a shared property between you and your spouse when you’re planning a divorce, a property you inherited from a relative, or a property that’s no longer in good condition.

But what types of properties get the best cash offers? And what steps can you take to increase the cash offers you receive?

The Realities of Cash Offers

First, it’s important to understand the reality of cash offers. If you’re listing the house for sale on a public market, some interested buyers might be willing to make formal offers in cash. This is usually done to gain a competitive advantage, so the offer looks more attractive than a competing offer. In hot markets, cash offers are common, but they’re somewhat rare when there are fewer competing bidders.

In addition, there are many individuals and businesses dedicated to buying properties in cash whenever a seller is motivated to get rid of the property as quickly and easily as possible. These types of cash offers are typically below the market value of your home. There are several reasons for this.

For starters, this is a risky transaction for the offerer. There’s no guarantee that they’ll be able to sell the home in the future, and there’s no guarantee they’ll be able to make their money back. Accordingly, they need to reduce their offer at least slightly to make up for this risk.

Purchasing a home in cash is also extremely convenient and efficient for the seller. If you’re selling a house in cash to one of these buyers, it’s probably because you don’t have the time or the willingness to put up with current market conditions. You can think of it as a luxury service that you’re paying for by accepting a lower offer; would you rather accept $200,000 for your home today or hold out and maybe get $250,000 for it after a few months of showings?

Finally, many homes bought in cash need rehabilitation and renovations. These can be both expensive and time consuming, so people calculating cash offers need to work them into their equations.

Knowing this, you should understand that even with a fantastic property, your cash offer is always going to be slightly lower than what you would list it for on the open market.

How Cash Offers Are Calculated

Cash offers on properties are typically calculated using at least the following variables:

  • Property location. Some locations are strictly better than others. If the neighborhood is popular, safe, and growing, the offer you receive is going to be higher. If the neighborhood is falling apart, plagued with criminal activity, or otherwise undesirable, you’re going to end up with a much lower offer.
  • Property size. Square footage is one of the most important metrics when determining a fair value for a property. The bigger the house, the bigger the offer will be. That doesn’t mean a big house will always earn a higher offer than a small house, but this is an important variable.
  • Property age. Cash offers on homes are also calculated based on the age of the property. Older homes tend to have more issues associated with them, so they tend to be riskier purchases. The newer your property is, the higher the offer you’re going to receive.
  • Property condition. And, of course, the property condition also enters into the equation. Some individuals and organizations are willing to make cash offers on properties without ever seeing them, while some insist on at least a visual inspection. The more rehabilitation and repairs of property needs, the lower the offer on it will be.

Individuals and companies who make cash offers typically do so very quickly, so they may not have the time or the ability to do a deep dive and fully inspect your property.

A Good Rule of Thumb

Many people making cash offers use some variation on the “70 percent rule.” Essentially, this means offering 70 percent of the home’s fair market value, or 70 percent minus anticipated expenses.

For example, let’s say your home would typically sell for $300,000 in a conventional market. It’s going to need $30,000 of repairs before it can be listed. This general rule would generate an initial cash offer of $210,000, and once subtracting the $30,000 of repairs, the offer would fall to $180,000.

Do note that not all individuals or institutions rely on this rule, and those that do still modify it based on what they know about the property. It’s just a general rule to help you ballpark what your offer might be.

How to Increase Cash Offers You Receive

So, what steps can you take to increase the cash offers you receive on your property?

  • Negotiate. One available option is to negotiate. You’re never going to push a cash buyer to make you an offer in line with conventional market value, but you might be able to get them to pay a bit more – especially if you’re willing to accept a higher offer on the spot. Traditional negotiating tactics can help you significantly here but be warned that many cash offers are firm.
  • Make repairs. If you believe you’ve received a low offer because your home is in need of repairs, you can consider making those repairs yourself. If you can fix up the house to restore its condition on a strict budget, you might end up in a more profitable position.
  • Shop around. Just because you receive a cash offer from one individual or organization doesn’t mean you have to accept it. In fact, it’s usually in your best interest to shop around and receive many different cash offers. This can help you establish what a fair offer truly is and potentially lead you to a higher offer from another candidate.
  • Consider alternative options. If you’re feeling apprehensive about selling after seeing the offer, consider your alternative options. Would it make more sense to try and sell the house yourself? Could you work with a real estate agent? Could you refinance the property so you can better afford it?

Selling a property is usually hard. But it doesn’t have to be. If your primary goal is to sell the property as quickly and painlessly as possible, selling in cash is probably your best option. Contact us to get a free offer on your home today!

Comments are closed.