Cash-for-Home Practices

In the real estate business, there are small companies whose business practice is to buy homes for cash to home owners who fall under these types of situations: a homeowner who can’t sell his house or his listing has expired; a homeowner who is divorcing; bankrupt homeowners; homes in probate; foreclosed homes; homeowners who are transferring; homeowners who are evicting tenants; vacant homes; damaged homes.

A typical real estate agent receives a percentage commission from the selling price, once a house is sold, and which includes fees for listing the house and other expenses which a real estate agent would usually require from the homeowner; however, in the cash-for-home practice, these small companies do not charge commissions or fees because they process the sales, internally, instead of hiring for an outside service and they pay their own title policies.

These small companies that buy homes for cash are referred to as equity purchase companies for reasons that they buy homes for cash based on the equity situation of a homeowner, such that this business strategy is to negotiate for the lowest price possible to the homeowner. Here are ways to determine on the net profit if a homeowner plans to sell his home to this type of company: the selling price will likely be less than 80% of the market value and the equity value could be discounted more than 50%; the company may offer to pay for the existing mortgage payments on the house; the company will use credit lines to cash the homeowner out so the negotiation can be closed as early as possible.
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Whether a homeowner sells his home to a conventional buyer or a cash for home company, either way, he will receive cash, except that a conventional buyer will be paying more as he will most probably make a house loan to pay off the homeowner’s existing mortgage, while the cash for home company will immediately pay cash, work on the homeowner’s mortgage, and the pay amount is less than the conventional buyer, but immediate, and they most probably resell the home to a conventional buyer for a higher price. Homeowners must be extra cautious of taking offers from a cash for home company and that it is more advisable for the homeowner to consider other alternatives to selling his home and preserving his equity status because observing the conventional practice, such as listing his home at a reputable real estate broker, can assure him of a better sales profit even if it takes a longer time to close a home transaction.Short Course on Resources – What You Should Know