Are cash offers for your home risky?

by Neil Sharma on 09 Sep 2021

Homeowners should beware of buyers soliciting them with cash offers, says the president of Right at Home Realty.

“Unfortunately, it’s one of those things where there’s nothing stopping an unlicensed individual from approaching anybody to buy their house, and unfortunately some of these things are quite predatory,” said John Lusink “I’ve gotten those letters in the mail at home too, and they go into the blue bin, but there are some people who are a little more trusting and can get taken advantage of. It’s the unfortunate and sad side of the real estate world, that’s for sure.

“It’s problematic for all-too-trusting homeowners or people in bad situations who need to sell, because they can get taken advantage of. If a realtor does this, there’s a resource—you could go to the regulator and file a complaint.”

It is difficult to ascertain how rampantly cash offers are made—roadside signs are commonplace, so one could deduce they occur with regularity. Such offers, which can sometimes come from companies established solely for the practice, are typically made in hot or overheated real estate markets.

But completing the transaction without the guidance of a realtor could leave the homeowner vulnerable, says Lusink.

“They won’t be afforded the same protections, but there’s a whole series of things that could go wrong—is there existing financing they have, and is the money they’re being paid enough to take care of that?”

Cash offers might appear anodyne—and there’s no doubt that some are made fairly and in good faith—but the most common issue is the homeowner won’t know the exact market value of their home if they forgo the services of a realtor.

“A lot of it is a hustle. A lot of that stuff in the mail I get at some of the properties I own; some are just realtors trying to poach business, saying they have a buyer lined up when they actually don’t—they just want to have a conversation with you to see if you’re interested in selling,” said Steve Saretsky, a realtor with Oakwyn Realty. “Both sides could save on the commission but there’s a reason buyers go through the whole process with realtors, and that’s to get a good price. You have to factor in not getting representation, and you’re probably not going to get a better price than if you expose it to the market on the MLS, because if you have a broad audience you will get more exposure and it will lead to a higher price.

“But the price could be offset by the commission you save. If they can offer a cash deal with no subject conditions and they can close in four weeks, that might be advantageous to you. Nine times out of 10 it’s not. It typically benefits the people looking for the deal.”

Ultimately, says Saretsky, it’s incumbent upon the seller to do their due diligence, which might be easier said than done.

“The biggest thing you look out for is price,” he said. “How do you know what your place is worth? They’re sending you the letter, which means they probably know the market really well, and if they’re executing a sale with you, they probably want a price that’s a little bit below market. Sometimes, as an agent, I can go into a property and not know the price. It’s a strange, hot market right now, so you don’t know unless you test the market sometimes.”

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