Doing a cash offer purchase and sale on a home requires a lot of skill and good business intuition. Most sellers would want to get the most of the properties they’re selling, so you can expect them to list such houses a little bit above their market value. If you’re not very familiar with the prices of properties based on their respective locations, it won’t be that easy to make an intelligent guess about their costs.
This is why you should keep in mind a few dos and don’ts if you want to buy a home with cash. If you don’t do this for a living, your estimates might be way off the mark. You need to do a lot of research for information before you head off to the seller with a cash offer.
- Find Out Prices Of Most Recently Sold Comps
One of the first things you have to do if you’re planning to become involved in the purchase of a house for cash is to make sure that you have a reasonable basis for what you believe is the fair market value of the property. This is important for so many reasons, but among them is that both the seller and the buyer don’t want to deviate too far from the fair market value of the property when they close the transaction.
Real estate appraisal companies come up with a reasonable estimate of the fair market value of a certain property by using the final sale price of one that’s near the vicinity or within the same neighborhood. Keep in mind, however, that only those properties that would fall under the definition of ‘comparable’ properties (also referred to as ‘comps’) should be included in computing the estimate.
To fall within the meaning of ‘comps,’ the properties should be similar to the property being sold. Some of the aspects appraisers would compare with comps are the total area of the property, the condition of the property, as well as the fixtures in it.
2. Check Out Comps That Weren’t Sold
Another thing that you should do is to look into the data on comps that weren’t sold. The information posted on real estate listings can give you a lot of insights into a particular property, whether it was sold or not. For one, if it was sold, it means the market, more or less agrees, with the listing price. If it wasn’t sold, it could possibly mean that the market doesn’t think that it’s worth its asking price.
You need to know these things if you’re planning to by a house with cash. Check out the features of those unsold properties. See if they’re any different or similar to the property you’re considering. Knowing these things would give you a lot of information on how much your initial cash offer should be.
- Don’t Offer To Buy Way Below The Fair Market Value
Don’t pitch a cash price offer that’s unreasonably or even ridiculously low. If you do this, you might not hear from the seller anymore because they might just walk away. Keep in mind that sellers sort of take some pride in the properties they’re selling, and most of them sincerely believe their properties are worth their listing prices.
2. Don’t Skip The Appraisal Report
You shouldn’t skip the appraisal report if you’re the buyer. The seller can opt to skip it since it’d be to their advantage if the property would be sold at or more than their asking price without waiting for an appraisal report. They’d be able to save time and expenses and be paid in cash at that.
But, as a buyer, you shouldn’t skip the appraisal report, unless you have a really good intuitive feel, or the property is in a neighborhood where you’ve made a recent purchase. Even if you’re buying in cash now, banks will still ask for the appraisal report if you decide down the road that you’re going to take a loan out of the same property.
When you’re going to make a cash offer on a home, you need to keep in mind some dos and don’ts. You have to make a thorough research on the fair market value of your prospective home based on previous final prices of recently sold properties in the area. You also need to check out the prices of both sold and unsold comps. You shouldn’t offer to buy way below the listing price. In addition to that, you shouldn’t skip the appraisal report.