Are You Getting a Fair Deal? Find Out How Much House Buying Companies Will Offer!

Selling your home can feel like a rollercoaster of emotions. Ashley J. shared with us what it was like. "I had to sell my childhood home after my parents passed away. The idea of strangers walking through those rooms filled with memories was hard to bear. That's when I found cash home buying companies. They promised a quick sale without the need for repairs, open houses, inspections or appraisals. I was glad to find someone to buy my home for cash."

You're here because you have questions. What do these house buying companies pay?

Are these cash offers really fair? How did they stack up against the market value?

We thought this article would help you learn more about house buying companies, like Danny Buys Houses, and their offers.

When a home owner decides to sell a house by owner, many times they don't know where to begin. If you're thinking about selling your property and wondering about cash offers, you're in the right spot. Let's dive into how much house buying companies offer and if it's the best choice for your particular situation.

Let's cut to the chase here right up front. When you sell your house on the open market with a real estate agent, you likely will have more eyeballs on the house. Therefore, you might have a larger buyer pool that could give you a higher asking price.

House-buying companies pay cash for investment and therefore usually offer less than you might get from someone that might want to move into the house. We will give you the info you need in this article to be able to decide whether getting a higher asking price but having to pay up to 6% in real estate agent commissions is worth the trade off of get a lower cash offer.

Let's jump in.

Key Takeaways

• Companies that buy houses for cash offer quick sales, often closing within days
• Cash offers typically range from 50% to 80% of a home's after-repair value
• Sellers trade market value for speed and convenience
• iBuyers use technology to make instant offers based on market data
• 'As-is' purchases eliminate the need for costly repairs
• Limited negotiation is common with house buying companies
• The Fair Housing Act protects against discrimination in real estate transactions

Understanding Cash Home Buying Companies

Cash home buying companies help home sellers sell quickly. They make all-cash offers and buy homes in any condition. This makes the selling process fast and easy.

These companies will make an offer without charging a fee. There is no-obligation to accept the offer.

What are cash home buyers?

Cash home buyers have the money ready to buy houses without needing a loan. They buy directly from sellers, making the sale quick and safe. In March 2024, 28% of home sales were cash deals, says the National Association of Realtors.

Benefits of selling to a cash buyer

Selling to a cash buyer has many perks:

• Cash offer within 24-48 hours usually
• Fast closing - as quick as 7 to 10 days
• Sell your home in as-is condition
• No need for repairs or staging
• Avoid the average 42-day mortgage approval process
• Flexible move-out dates
• They handle the paperwork

Potential drawbacks to consider

But, selling to cash buyers has some downsides:

• Lower offers compared to market value (typically 50-80% of market price)
• No real estate agent with your best interests in mind on your side

Home sellers should think about these points when looking at cash offers. It's important to find trustworthy buyers and know the trade-offs between speed and price.

How Much Do House Buying Companies Offer?

Cash home buyers help homeowners sell their properties quickly. But, what can you expect to get for your home? How much will they offer?

Typical Offer Range

The typical offer range is between 50% and 80% of market value. But what is market value? Market value is what the house would sell for on the open market. This value is influenced by many things but the biggest influence is the condition and location of the home. If your house needs a lot of major repairs, the market value is much lower. If the house is move-in ready, market value is similar to what other houses that are in that shape sell for.

Factors Influencing Cash Offers

Several things can change the fair offer you might get:

• Property condition
• Location
• Current real estate market trends
• The buyer's investment strategy
• Condition of the home (repairs and updating)
• Cost to make the repairs needed
• Speed with which closing is needed

What a cash house buying company will pay depends on one or all of these factors. Companies figure out a property's worth by comparing it to similar ones. They might use valuations from estate agents or online tools.

The 70% ARV Rule

Reputable cash home buying companies typically offer based on a formula based on a percentage of a property's market value. This covers their costs and lets them make a profit. In some cases, they might offer more, like when they get stamp duty exemptions.

The percentage most house buying companies use is 70% of the ARV. ARV stands for After Repair Valued. This is what the house will be worth after all repairs, updating, landscaping, etc. are completed. Basically, move-in ready, like-new condition.

They then subtract what they calculate to be the cost to them to fix up the house.

The 30% they take off the value is for:

• Their profit
• The cost of having their money in the project
• The holding costs involved in owning the house
• The selling costs they will incur when they go to sell the house

According to BiggerPockets, "The 70% rule states that real estate investors shouldn’t pay more than 70% of the ARV minus the repairs needed. For example, if a house is $150,000 and needs $20,000 in repairs, the 70% rule states that no more than $85,000 should be paid. The math looks like this:

• $150,000 (ARV) x .70 (ARV percentage) = $105,000
• $105,000 – $20,000 (ERC) = $85,000 (buying price)"

What percentage is a fair offer on a house?

Finding a fair offer on a house depends on many things. Market conditions are key in deciding what's fair. We'll look into comparing cash offers to market value and finding a balance between price and convenience.

Comparing cash offers to market value

A comparative market analysis helps figure out if an offer is fair. In a buyer's market, offering 10% to 20% less than the asking price might work, especially for properties that need work. But in a seller's market, you might need to offer at or near the listing price because there's high demand.

Cash offers usually are made based on the 70% formula described earlier in this article.. This might seem low, but think about the savings on closing costs and possible repairs. A professional appraisal can give you a clearer idea of what the property is really worth.

Understanding the trade-off between price and convenience

There are pros and cons to selling to a cash home buying company.

Cash offers are often faster and more certain, which can be great in some cases. For example, if you need to sell quickly because of a move or financial issues, a lower cash offer might be okay. But, you have to think about the trade-off between speed and possibly getting less for your house.

• Cash offers can close in as little as two weeks
• No risk of buyer financing falling through
• Fewer contingencies and a simpler negotiation process

The "fairness" of an offer isn't just about the price. Think about your situation, the house's condition, and your timeline. Be ready to negotiate based on your research and reasons to find a deal that works for both sides.

When comparing sell by owner on the open market versus to a cash buyer, you will want to consider the ins and outs of selling by owner. This way you can see how much benefit each option provides.

Are companies that offer cash on a house legit?

Cash home buying companies can be a good choice for sellers wanting a quick sale. Many reputable firms work in this field. But, it's important to know the risks. The lack of strict rules can lead to scams and unfair pricing from a real estate investor.

Let's discuss what to look out for so you can protect yourself.

Red flags to watch out for with cash offers

Watch for these signs to avoid bad deals:

• Outlier offer way higher than all other offers
• Difficult communication and calls not returned
• Delayed receipting of contract
• Reluctance to provide a proof of funds
• Last-minute price drops before closing

Be cautious of offers that seem too good to be true. High offers might be a trick to get you to agree, then change the terms. If you accept one o these offers, make sure the buyer is paying a large earnest money deposit. This helps to ensure the closing will happen. We feel $2,000 should be sufficient as earnest money to give a margin of safety.

"If a deal seems too good to be true, it probably is. Always do your due diligence when selling your home for cash." - Danny Johnson, Owner of Danny Buys Houses in San Antonio, TX.

If you have a cash buyer that wants to buy your home but you are having difficulty with getting them to return calls and texts, you probably should walk away. Maybe even run. Trustworthy house buying companies operate professionally and are quick to respond.

If you sign a contract to sell your property and the buyer does not get it receipted at a local title company within a day, you will want to find out why. Once a contract is signed by both parties, it should be taken to a title company along with the agree upon amount of earnest money.

You can ask for proof of funds and check the buyer's reputation with the Better Business Bureau. Ensure there are not any complaints with the BBB.

Should You Get a Cash Offer From a House Buying Company?

Short answer is a resounding yes!

Cash home buyers offer a quick solution for homeowners needing a fast sale. Even if your home's market value is higher, these companies provide speed and convenience.

The 70% ARV rule is key when dealing with cash buyers. It explains why offers might seem lower than expected. A fair offer balances the need for a quick sale with the market value. It's important to think about the benefits of a fast sale versus possibly getting a higher price through traditional selling.

To get a fair deal, look into different house buying companies and compare their offers. Be ready to negotiate and watch for signs of less reputable companies. With careful thought and research, selling to cash home buyers can be a good choice for those who value speed and certainty in selling their homes.

Get an offer today! Give us a call or fill out our fast cash offer form to find out what we can offer on your house. There is no-obligation and no cost to you. We move quickly and purchase properties in poor or good condition. We also have reviews you can verify on our reviews page. We hope to talk with you soon.