A seller’s goal should be to find the highest offer with the strongest probability of closing. While a near asking price offer may look great after initial review, it may be full of unnecessary contingencies and red flags that may put you in a bad position as the seller. What if you knew what to look for at the beginning of your home-selling journey? What if you knew what questions to ask of an interested cash buyer that would prepare you with the necessary information to make the best decision possible? Below are just some of the markers that you should keep in mind when working with a cash buyer on the sale of your home.
1. Strong Offer Terms
A strong cash buyer should be offering to purchase the property “as-is” in its current condition with no expectations of the seller doing any work to the property before close of escrow. Contingency periods should not be unnecessarily long, and should fall in the range of 3 to 10 days depending on the complexity of any necessary due diligence. The earnest money deposit should be substantial and submitted to escrow within 72 hours of offer acceptance or sooner. While cash sales typically close quicker than traditional financed offers, there should be no rush from the buyer’s side to close escrow. In fact, there is a flexibility that should be expected of the buyer to close on the Seller’s timeline!
2. Access to Capital
One of the basic items investors should provide when submitting an offer is a proof of funds letter. This letter is typically from an attorney or lender that shows they have the funds available to to clear their offer amount and close escrow. However, you shouldn’t give this a quick once over and assume everything is ok. There are two important items you need to look at to confirm: the date of the proof of funds letter and where the funds are coming from. The date of the letter is important because, if it is months old, they may have depleted the account. A very outdated proof of funds letter may also suggest the investor is not telling you the full story and could be an indicator of things to come.
It’s also extremely important to note what kind of an account the funds are coming from. If the money isn’t in a liquid account such as a checking or savings account, there could be red tape and hurdles to access it. Without timely access to their funds, an investor may have to jump through hoops to bring funds to the table to close escrow which could risk pushing out the agreed upon close date.
3. Proven track record
Credibility may be one of the most important things to confirm in a potential buyer before accepting their offer. Doing so is easy if you know what questions to ask and where to look to confirm a buyer’s track record. Always ask for referrals and reach out to people they have worked with in the past for feedback on how their transaction went. Research the buyer online and dig into their testimonials and get a sense of what other people are saying about them. Look at their social media pages and the comments on their recent posts to see how they interact with their customers and followers. Ask the buyer for a list of active or past projects in your area to get a sense of how active they are and what their local experience is like.
Lack of timely response and bad communication can sour any relationship. This is even more amplified when the stakes are high you’re trying to selling your home in an efficient and stress-free way. Real estate transactions require a significant amount of back and forth, whether it be in regards to offer terms, paperwork questions, deal structuring, signatures, etc. If the buyer and/or their agent respond to a call or text within a reasonable amount of time or return contract changes in a timely fashion, something fishy may be looming. Be aware that there are buyers out there that don’t practice ethics and integrity that may just be spinning your wheels – bad communication can often be a tell-tale sign things are going in a negative direction