A stranger called offering to buy your house for cash. Is it a scam? Not necessarily. —-
You’re scrolling through your texts: Your friend asked you to meet for coffee, your sister sent a cute pic of her puppy, a complete stranger offered you cash for your house — wait, what? Your home isn’t for sale.
If you’re fielding phone calls, text messages, and postcards from people who want to buy your home — for cash, nonetheless — you’re not alone. Investors and buyers on the hunt for real estate deals employ these tactics to find off-market properties.
To give us background on why homeowners receive unsolicited offers and where they come from, we spoke with Daren Sautter, a top New Jersey real agent on the board of directors for the NEXUS Association of Realtors®. He advises that if homeowners want top dollar for their home, an unsolicited cash offer probably isn’t your best choice. But if convenience is more important to you, you may want to consider it.
Source: (Kelli McClintock / Unsplash)
Unsolicited offers come from many types of buyers
Property owners may receive unsolicited offers via mailers, text messages, and cold calls from a range of eager buyers like real estate investors seeking lucrative returns and homebuyers intent on a coveted neighborhood.
Wholesalers source properties for real estate investors who want to avoid the effort of finding homes. Wholesalers do the legwork; they approach homeowners with unsolicited offers and negotiate a below-market sale price (i.e., a price lower than what buyers would pay for your home on the open market). The negotiated purchase price between the wholesaler and homeowner needs to be low enough for both the wholesaler and the investor buyer to profit. The buyer pays the wholesaler an agreed-upon percentage of the purchase price as a finder’s fee, usually 5% to 10%.
In many cases, the wholesaler doesn’t actually purchase or take the title of the home. After negotiating a purchase price with the homeowner, the wholesaler may immediately assign the contract, or the right to purchase the house, to an investor client.
Other times, a wholesaler purchases the property outright (instead of assigning the contract) then immediately resells it to another investor. “They’ll say [to a homeowner], ‘I’ll give you $300,000 for your house,’” explains Sautter. “[The wholesaler] already knows that it’s worth $350,000 to somebody else. So they buy from you for $300,000 and sell to somebody else for $350,000.”
Real estate investors
If you’re a fan of HGTV house flipping reality shows, you’ve probably seen real estate investors snapping up properties at auction. But a foreclosure auction isn’t the only source for finding houses to invest in. Investors also approach homeowners with unsolicited and solicited cash offers.
Investors generally either fix and flip homes or hold onto them as rental properties. Like wholesalers, they tend to offer less than market value for properties to profit from their purchases.
“[House flippers] lowball you in most cases because they’re gonna buy the property, fix it up and sell it for profit,” says Sautter.
Real estate investors who approach homeowners directly with unsolicited offers may be:
Individuals who flip homes for a living
Multiple investors who pool their money to buy homes for cash
Home buying companies that specialize in buying homes with cash, such as HomeVestors®, the parent company of We Buy Ugly Houses®
Homebuyers and their real estate agents
Not all unsolicited offers come from investors seeking financial gain. Homebuyers and their real estate agents may approach property owners with unsolicited offers, particularly in competitive markets where housing is in short supply and buyer demand outstrips available homes.
A buyer may send out unsolicited offers to make an off-market deal directly with a seller and avoid bidding against competing buyers (who will drive up the price for the home). A buyer may also make an unsolicited offer to target a specific dream house or neighborhood.
An unsolicited offer from a buyer who intends to live in the property may be a cash offer or an offer backed by financing.
Unsolicited offers grow as the inventory shortage continues
Why do homebuyers and investors bother approaching homeowners directly? Why not just buy homes that are already on the open market?
There simply aren’t enough available homes to go around today. Even before the 2020 pandemic and the concurrent homebuying boom, there weren’t enough properties for sale to accommodate the number of buyers in the market. According to Freddie Mac, the U.S. had a deficit of 2.5 million units in 2018, which grew to 3.8 million by 2020. This shortage of available inventory has led to a seller’s market, where buyers often compete against multiple offers to secure a home.
In addition to low inventory, buyers today face rising home prices, making it difficult for many to purchase the home they desire. According to U.S. Census data, as reported by the Saint Louis Federal Reserve, the median home price in the U.S. has risen nearly 16% in recent years, from $299,800 in the first quarter of 2016 to $347,500 in 2021.
The strong buyer demand, lack of inventory, and subsequent rise in home prices may explain why more homeowners are receiving unsolicited offers. Unsolicited offers allow investors who need to buy homes at below-market prices to make a profit to dodge buyer competition by going directly to the source — unsuspecting homeowners.
Source: (Benjamin Rascoe / Unsplash)
Unsolicited offers are typically lower than your home’s value
Since property investors aim to profit from your home, you can expect an unsolicited offer that’s lower than if you were to place your home on the open market or your local MLS. Some cash buyers are willing to buy your home as-is — meaning no repairs, no staging, no pre-listing home prep, no back-and-forth negotiation, and a shorter close of escrow.
Sellers benefit from cash offers from investors because of the ease and speed of closing the sale. “It’s a convenience factor,” says Sautter. “But like anything else, if you’re buying convenience, you’re taking less money … I’ve had people take a $300,000 cash as-is offer versus a $325,000 offer,” Sautter recounts. “The seller thinks, ‘I’m going to have my money in five days versus waiting 45 days for a mortgage.’”
If you’re approached with an offer from someone who’s planning to live in your home, you’re more likely to net a price that’s closer to your home’s market price. Chances are, this buyer type isn’t concerned about buying low enough to make a profit. They simply want to avoid competing with other buyers to secure a home they love.
Determine your home’s fair market value to size up an unsolicited offer
To determine how an unsolicited offer compares to your home’s true market value, try HomeLight’s Home Value Estimator. Answer a few questions about your home, and our algorithm will analyze your answers and local housing market data to provide an automated valuation. For a more detailed comparative market analysis, HomeLight can also refer you to a top real estate agent specializing in your area.
Steps to reduce the number of unsolicited offers
Unfortunately, there’s no surefire way to avoid unsolicited offers on your home. Like spam emails, some unwanted messages are bound to cross your radar. But you can cut down on interaction from persistent cash buyers using these methods:
Place your phone number on the national Do Not Call Registry.
Block unwanted calls and texts on your cell phone. Use your phone’s built-in call screening features, such as silencing calls from unknown numbers. You can also download a call-blocking app that intercepts calls that are likely illegal or scams.
Tell companies who contact you to remove your information from their phone and mailing lists.
Remove your address from direct mailing lists. Sign up for the Data & Marketing Association’s marketing list opt-out service.
If you’re considering an unsolicited offer, weigh these factors
Perhaps you hadn’t thought about selling, but a recent cash offer looks too tempting to pass up. Before you rush to accept, first find out what the competition would be willing to pay. Then decide what option makes the most sense for your situation.
Consult with a local real estate agent to determine your home’s fair market value and the amount you could net if you sold your home on the open market. Should you accept an unsolicited cash offer or list your home with a real estate agent? Beyond the purchase price, weigh these factors when making your decision.
Staging costs: You won’t need to stage your home when a cash buyer approaches you with an offer. Staging costs average $1,500 if you list your home.
Home repairs: With an unsolicited cash offer, you generally aren’t on the hook for home repairs. If listing your home on the open market, this cost varies based on the condition of your home.
Closing costs and fees: Many cash buyers are willing to pay all closing costs. If listing on the open market, expect to pay 9% to 10% of the purchase price in fees, including agent commissions.
Marketing time: Marketing your home isn’t necessary with an unsolicited cash offer. When listing your home, marketing times vary depending on your location and current market conditions. In May 2021, a survey by the National Association of Realtors® reported homes were on the market for a median of 17 days, down from 24 days the previous year.
Escrow time: Cash buyers can close in a matter of days. Fannie Mae reported in January 2020 that purchases with a conventional home loan closed in 48 days, on average.
The bottom line: Weigh how much you’ll net at the end of the sale after expenses against the amount of time and effort the sale will take.
If you’d rather go with an instant cash offer than list on the market, you should still compare the buyer’s offer to other cash offers. One option: HomeLight’s Simple Sale. We’ll give you a competitive top-market offer — no additional fees, commission, or upfront costs.
Should you accept an unsolicited offer from a buyer? Maybe.
The hotter the seller’s market, the more unsolicited offers you’ll probably receive on your home. If selling the traditional way (listing your home on the MLS with a real estate agent) isn’t the right path for you, a cash buyer could be your solution. But first, weigh all your available options before committing to the first unsolicited offer that slides into your text messages.
Header Image Source: (Rumman Amin / Unsplash)
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