Selling My House For Cash : What Will My Offer Actually Look Like | Syracuse NY
I take it you are in the process of figuring out which option to choose to sell your home?
Maybe you are in a situation where you are moving out of state and don't want to pay 2 mortgages or risk your home sitting on the market for months, selling with an agent.
or did you just inherit a property from a deceased love one and you are trying to figure out the best way to sell this property fast?
Whatever your reasoning to sell is, you are in search for more answers if you were to sell your house for cash.
The concept of selling your house for cash can be very advantageous to certain homeowners. They have the ability to offer very beneficial terms and move quickly because they will not be relying on a bank/lender for funding.
However, due to the great terms that you will be offered, these buyers will be looking for a discount on the purchase price in return.
So I imagine that you came to this post because you were wondering how much money you might actually receive from a cash purchase and how these cash buyers/investors determine the amount they will be able to pay for your home.
Before we go any further, I want to explain that there will be two types of cash purchases. The first type of cash purchase is when a homeowner purchases a primary residence in cash for at or around full market value (this is about .00000001% of sales in Syracuse NY). The second type of cash purchase is when an investor purchases a property at a discount and adds value to create a profit (these are the majority of cash offers you will see in Upstate NY). We will be touching on the latter today, since the former rarely happens in Syracuse NY.
In Syracuse NY, a cash buyer is another name for a real estate investor. All buyers who purchases homes with cash will be looking to earn a profit on the property through fixing it up and selling, fixing it up and renting, buying at a slight discount in good condition and renting among other strategies that are used.
Full Market Value Analysis
The first step for any real estate investor or cash buyer is to determine the full market value or the ARV.
The ARV is the starting point for all calculations when it comes to an investment.
The ARV or After Repair Value is what the home will sell for in great condition or the full market value of the home.
In order to determine the full market value of your property, a comparable market analysis will be ran.
A comparable market analysis is an examination of prices at which similiar properties in the same area recently sold.
Within this comparable market analysis, the cash buyer will be looking at:
bedrooms & bathrooms
real estate market conditions
So after the cash buyer determines the full market value of your home, his next step will be to see what type of condition your home is in and how much it will cost him to get to that ARV or full market value.
How Much Will It Cost The Cash Home Buyer To Fix?
The next step an investor will take is to determine the repair costs associated with your home.
The repair costs are the total amount of money it will cost the cash buyer/investor to fix your home up. The repair costs play a big role in how much cash he will be able to offer to purchase your property. So if your house is in poor condition, you should expect a lower cash offer.
Typically, how this step will work is the investor will get an initial idea of the repairs needed through a phone conversation either when you reached out to him or he reaches out to you.
If he feels like this is will be a good solution for all parties involved, the cash buyer will then set up an appointment to get a more detailed look into the condition of the property.
This will be a good opportunity for you as the homeowner to get to meet the investor and see if you feel comfortable with him/her.
After the walk through, the investor will now have the majority of the information that he needs from the homeowner to put together a cash offer on the home.
The next step in the process will be determining how much he will be able to offer you. Lets go over how he will get to his Maximum Purchase Price.
The Formulas Cash Buyers Use To Determine Your Offer
There are several different formulas that real estate investors will use to evaluate a property depending on the strategy they intend to use for your property.
To keep it simple we will touch on the strategy where the majority of cash offers will be coming from... fix and flips.
*If you are interested in learning how investors evaluate rental properties, check out this blog post*
So how will a cash buyer determine how much money he will be able to offer you?
These real estate investors will use a simple formula. This formula is made up of:
These 4 variables will help determine a maximum purchase price that they will be able to offer you and still make a profit on their end.
Lets go over a quick example.
You are looking to sell your home because you are moving out of state and you owe 2 years of back taxes on the home that you do not want to deal with.
You are willing to sell the property for $45,000 but you need to sell the home fast.
You contact a real estate investor and he determines that similiar properties in great condition are selling for $110,000.