How Much Do You Lose When You Sell Your House for Cash?

An increasing number of buyers are making cash offers on properties. According to the National Association of Realtors (NAR), 32% of all home purchases in January 2024 were made with cash. This reflects a steady increase in cash home purchases and beats out the record-high percentages of cash transactions in 2014. 

This trend of cash buyers affects sellers as well. People often ask, “How much do you lose when you sell your house for cash?” The answer depends on your listing price and the type of buyers you are working with.

Learn more about selling your house for cash and using this trend.

What is a Cash Sale? 

A cash sale occurs when a buyer does not require financing to purchase your home. They might have profited from their previous home sale or have other savings they can use to buy your property.

The main benefit of selling your house for cash is that you don’t have to wait for the buyer to secure a mortgage and you don’t face the risk that they will not get financing. Many sellers actually prefer cash offers because they don’t have to wait for the financing to go through in order to close. 

A cash buyer can come from just about anywhere. You can traditionally market your house and receive cash offers from potential buyers. You can also receive offers from cash investors before your house ever hits the market.

The source of your cash offer often indicates whether you are losing money on the sale or not. This article will go into greater detail about the different types of cash offers and why you lose money on some but not others.

Cash Sale vs. Traditional Sale: What’s the Difference? 

Before you can dig into the process of selling a house for cash, it helps to have an overview of a traditional sale. With a traditional real estate listing, your agent will place your property on the multiple listing service (MLS) based on its fair market value.

Potential buyers will tour the house, and if they like it, make an offer. If you accept their offer, the buyer will work with their lender to secure a mortgage. It is increasingly common for buyers to work with lenders before they make offers so they know that they’re likely to be approved for the loan. 

Estimates vary by lender, but experts believe it takes 45 days on average to secure a mortgage. Most lenders ask buyers to give the mortgage application process a 30 to 60-day window. During this time, the seller is still responsible for the house and needs to set a reasonable closing date that works with the mortgage application process.

Cash sales skip the mortgage application process entirely and sometimes bypass the MLS listings as well. Real estate investors or potential buyers reach out to homeowners and make cash offers on their properties.

Because there is no need for financing, the deal can close shortly after the home inspection and appraisal process. This is often ideal for sellers who don’t have to make repairs on their properties and can move forward with an as-is sale. They can also move quickly and don’t have to take the risk that their house doesn’t sell.

Who Receives Cash Offers? 

In a hot housing market, almost any homeowner is likely to receive offers from cash buyers. You might not even be interested in moving when you are contacted by potential investors.

This is because investors want to swoop in and purchase the home before they are outbid by other buyers.

Here are a few primary targets of real estate investors who are likely to make cash offers on properties:

• People who own distressed homes: Investors might reach out to people living in worn down, damaged, or condemned houses to buy the properties and flip them. 
• Owners facing foreclosure: Buyers offer to help families facing foreclosure who want to sell their homes quickly instead of falling into debt or hurting their credit scores. 
• Beneficiaries who recently inherited houses: Investors might contact heirs to convince them to sell the house for cash instead of listing it on the market. 
• People who experienced changes in their home values: Cash buyers might reach out to homeowners who are affected by climate change or recently experienced reduced property values through the development of interstates or airports near their homes. 

People who make cash offers on homes often target vulnerable individuals who either need to sell their properties quickly or wouldn’t be able to sell the house at all. This is why they make lowball offers on the homes.

Types of Cash Buyers

Not all cash buyers are the same. Understanding the different people and companies you might work with can help you determine whether an offer is fair and you will be treated reasonably. Here are a few types of cash buyers you could encounter.

• Traditional cash buyers: These are people who have enough money to make offers on properties with cash. They are most likely to offer a fair market value bid. 
• Home flippers: These are investors who buy distressed homes for low prices, fix them up, and then resell them for a higher price. Flippers can be individuals or companies. 
• Individual investors: These are individuals who are looking to expand their investment portfolios through real estate. They might use your house as a second home or rent it to tenants. 
• Investor firms: These are large companies that buy houses and then collect rental income from them. They might give you a fair market price for your property because they do not intend to sell it anytime soon. 
• Cash-for-Homes companies: These are companies that buy distressed homes and then sell them to home flippers or investors. They are most likely to make a lowball offer.
• iBuyers: Also known as online buyers, iBuyers agree to purchase your home within a week. They are known for lowballing home sellers so they can resell the property and turn a profit. They can also charge hefty fees. 

While you could sell your home to an iBuyer within a matter of minutes, you likely won’t get the amount you deserve for the property. However, working with a private investor could increase your chances of getting the market value and while potentially saving on closing costs. 

How Much Do You Lose When You Sell Your House for Cash?

You don’t necessarily lose money by accepting a cash offer for your home. If you go through the traditional listing process, you might receive a bid at market value with a cash payment.

However, if you work with house flippers or cash-for-homes companies, you’re more likely to lose money. These businesses make money by buying properties at exceptionally low rates, making any necessary repairs, and then selling them for much more. it is in their best interest to get you to accept as low a price as possible for your home.

Definitions vary on what is considered a lowball offer. Some people believe a lowball offer is anything that is 25% or more below the asking price. Others define a low-ball offer as a bid that is 10% or more below market value. 

The first step when listing your house is to get an appraisal or ask your real estate agent to conduct a comparative market analysis (CMA) on the property.  This will give you an idea of what your home is currently worth in the real estate market.

From there, you can wait for offers by house flippers and real estate investor companies. Their lowball offers will tell you how much you stand to lose if you work with one of these buyers. 

For example, if your home is appraised at $300,000 and they offer $240,000, you are losing up to $60,000 by accepting the cash offer.

Pros of Selling Your House for Cash

There are several benefits of selling your house for cash if you can get an offer within your fair market value. Many homeowners actively seek out cash buyers throughout the selling process. Here are a few reasons to consider this option. 

• Faster closing periods: Some cash buyers are willing to close on your property within seven days. Even if the closing period takes longer, it is still usually faster than accepting a bid that requires a mortgage application. 
• Fewer contingencies: Cash buyers are more likely to buy a house as-is. This is because they have the funds to make repairs and plan to flip the home with significant improvements.
• Reduced bureaucratic hurdles: As a seller, you do not have to worry about lenders potentially denying funding to buyers. This is why the closing process is faster. 
• Cost savings: While there is a chance that you lose money by accepting a lower bid through a cash offer, you can potentially save money by not having to pay any real estate agents who would traditionally be involved. the commission savings could be worth it.  

If you are considering this option, it is still worth it to contact a local real estate agent to get an estimate for your home value and discuss your listing options. They can walk you through any additional benefits of accepting cash offers and help you navigate the investor bidding process.

Cons of Selling Your House for Cash

While many homeowners are tempted to go through an as-is sale with a cash buyer, there are significant drawbacks to choosing this route. Here are a few concerns you should be aware of as you weigh your options. 

• You will receive lowball offers: The biggest concern is the amount of money you will lose selling a house for cash. The vast majority of investors and home flippers make lowball offers to increase the chances that they turn a profit. 
• You won’t be able to counter the offer: Many cash-for-homes companies and investors make single offers and refuse to negotiate. Even if you receive a lowball offer, you won’t be able to counter with a higher number. 
• There won’t be any competitive bidding: When you list your home on the MLS, there is potential for multiple people to bid on your property. This could potentially increase your sale price.
• You may have to pay unexpected fees: Some online buyers (iBuyers) and cash-for-homes companies charge sellers extra fees to process the sale or make repairs. This eats into your profits.

Essentially, you need to decide how much money you are willing to lose selling a house for cash. While going through the traditional listing route takes more work, it often results in more money for the seller.

Should You Sell Your House to a Cash Buyer?

Every homeowner is different which is why it is impossible to definitively say whether or not you should sell your house for cash. Fortunately, there are some questions you can ask to evaluate your situation and determine whether selling your house as-is is the best call.

• Do you have the ability to make repairs? Major repairs and home upgrades are costly and time-consuming. Not every homeowner can fix up a house before listing it. If you are unable to improve your home, it might be better to list your house as-is and look for cash buyers. 
• How quickly do you need to move? You might decide to look for cash buyers and skip the local housing market if you need to sell your house fast. For example, you may need to move because you are facing foreclosure or aren’t getting a divorce. If you are moving for work, consider working with a relocation company instead of cash buyers. 
• How much are you willing to lose selling a house? You have to face the reality of accepting an offer below Market value. consider the bare minimum you are willing to receive for your home. 
• Would a traditional listing inconvenience you? Standard home listings take time and require you to set aside. the day for showings and open houses. however, if you are willing to put up with these events, you might get more money by opting for a traditional sale.

It is always possible to share your property on the MLS and then change your mind and work with a cash buyer. However, you cannot accept a deal from a cash buyer and then decide you would rather list your home and receive market value bids.

Hire Real Estate Agents to Get the Fair Market Value for Your Home

There’s nothing wrong with receiving a cash offer for your house. Many buyers and reputable investors are willing to offer the market value to sellers and use cash to complete the purchase. However, you want to be careful when a cash buyer makes a lowball offer that is significantly below what your property is worth. This person could be trying to scam you out of your house. 

Cash buyers often incentivize sellers with quick closing dates and waived fees, hoping the convenience of an easy home sale will encourage them to accept less money. However, you deserve the market value for your home. don’t let investors pressure you into a deal and never accept an offer you don’t feel comfortable with.

One of the best ways to sell your home quickly while getting the amount you deserve for it is to hire a trusted real estate agent. An experienced Realtor will market your property and attract buyers who see the value in your house. They can also identify lowball offers and investors who are trying to flip your property. Even if you decide to accept a cash offer, work with the real estate agent throughout the process. they can help you get a fair deal.

To find real estate agents in your region, turn to FastExpert. You can read agent profiles and contact Realtors who have the experience you need. The right agent will be a partner by your side from the day you decide to sell until you close.