If you are asking “What are the Different Kinds of Companies That Buy Houses for Cash” then you’re in the right place!
We wrote this article to help people understand the types of companies that buy houses for cash so you know who you are talking to. Read on to learn more.
If you need to sell a house you’re probably researching different sales strategies to sell it. You may have (if not yet, you definitely will) come across cash house buying companies in your research. A cash house buying company may have even contacted you directly with a postcard in the mail or a phone call.
Selling a house for cash is unfamiliar to the majority of people. A lot of people think selling a house with a realtor is the only option.
However it is not, and in a lot of situations it isn’t even possible to sell with a realtor given house condition or timing requirements. Bottom line is having questions about selling a house for cash is completely understandable.
If you, like most people are new to the idea of selling your house for cash I suggest you check out our Selling a Home for Cash Information Hub. It’s packed with informational articles and FAQs. We add new resources all the time, and it might be the most in depth resource on the web for understanding the ins-and-outs of the selling a house for cash process.
Also, if you’re looking to understand the different strategies you can use to sell a house, such as with a realtor, for sale by owner, to a cash buyer, etc. then check out our Ultimate Guide for Selling a House.
In this article we focus on answering the question What are the Different Kinds of Companies That Buy Houses for Cash? So let’s dive into it.
What is a Cash Buyer?
If you are completely, 100% brand new to the concept of selling a house for cash then you need to first understand what selling a house for cash is, or more specifically what a cash buyer is.
In its absolute simplest terms a cash buyer is someone who buys your house and pays for it in cash. There are other “cash” funding sources outside of just cold hard cash, but those are outside the scope of this article.
For this article we will say a cash buyer is one who uses cash and does not use a traditional mortgage lender to fund the purchase.
Someone buying your house for cash has obvious benefits over a buyer that is using a traditional mortgage to fund the purchase. These include benefits like a much faster closing, no mortgage contingencies, usually they buy as-is, etc.
Within the group of cash buyers there are different parties, which is what we will now explain.
The Kinds of Companies That Buy Houses for Cash
As you research selling your house for cash you will start to notice the terms “we buy houses company”, “cash house buying company”, “cash buyer”, “wholesaler”, etc. get throw around a lot. But these can mean different things. There are many different types of companies that buy houses for cash.
To keep it simple we can group the companies into three groups. The first group is wholesalers. The second group is cash buying companies that buy houses that meet their investment criteria. We include iBuyers in this group. The third type is a hybrid company that buys some of the properties and assigns the contracts of other properties if necessary.
There are also individual investors or homeowners that may offer to buy houses for cash. I am not including them in detail in this article because they are individuals and not companies, but do know they exist.
The thing to note with most individual buyers is that they are working with a real estate agent. Because of this that real estate agent must be compensated with a commission, and you as the seller may have to pay it if the buyer does not agree to.
Wholesalers are firms whose strategy is to put your house under an assignable contract and then find a cash buyer to assign the contract to. Pure wholesaling firms either don’t have the ability to or the intention to actually buy your house. Their intention is solely to assign your contract for a profit to a third party, who is a cash buyer.
There is nothing wrong with wholesalers. They can provide a valuable service to you as a seller if you need to sell your house for cash much quicker than the traditional method of selling with a realtor and you are happy with the price they offer. This is especially true if the wholesaler is up front and honest with you about their intention to assign the contract.
Things to watch out for is inexperienced wholesalers or unethical wholesalers who will promise you the moon and fail to deliver. Some problems they may create are offering way too much for your house or promising to close way too quickly in order to get it under contract. This will most of the time result in them coming back to you asking for 1. a price reduction after the contract is signed because they can’t find a buyer to assign the contract to at the price they offered you or 2. an extension of the closing date because…you guessed it…they can’t find a buyer to assign the contract to.
Experienced, honest and ethical wholesalers will offer a realistic price they know will allow them to be able to assign the contract for by the agreed upon closing date.
Wholesalers can provide a valuable service to you as a seller if you need to sell your house for cash much quicker than the traditional method of selling with a realtor and you are happy with the price they offer. The wholesaler should be upfront about their intentions to assign the contract. Work with an experienced, honest wholesaler vs. an inexperienced or unethical one to save you hassles and headaches down the road.
A quick overview on assignable contracts
An assignable contract is a contract with a provision allowing the buyer to assign the rights and obligations of the contract agreement to another party. This isn’t a separate contract. It is just a standard contract with an assignment provision included within the contract. If the assignable contract is assigned to a third party then that third party is obligated and responsible to purchase the property under the same exact terms (price, contingencies, as-is, etc. etc.) of the contract that the seller agreed to. The only thing that changes from the seller’s perspective is who the end buyer is that buys the house.
You should be aware that many investors and companies in addition to wholesalers will use an assignment provision in their offer. In fact, most cash house buying companies, hybrid cash house buying/wholesaling companies as well as many individual investors use assignment provisions when making offers.
Using an assignment provision is not done 100% with the intention to assign the contract. It is done to give the buyer more options. For instance, the buyer could make the offer in their personal name and “assign” it to their LLC if they want to buy it or fund the property under a company vs. personally. Also, if the buyer cannot get funding for the property they can assign the contract, saving the deal from falling through.
2. Cash house buying companies
Cash house buying companies are end buyers. They are typically flippers or investment firms seeking to buy houses at a discount to either flip them for a profit or hold as a rental investments longer term. The types of companies that fall into this category is very large, and it would take a book to describe all of them. I will do my best to summarize the major ones here.
These firms may or may not work with a buyer’s agent, which means there could potentially be a realtor and realtor fee involved. Many investment firms have very strict purchasing criteria that each purchase needs to meet and will not go outside of that criteria.
Some of these cash house buying firms may represent or work for hedge fund or institutional buyers.
Things to note about cash house buying firms representing or working for head funds/institutional buyers:
You should be aware that these groups have extremely strict purchasing criteria and the decision to buy may be based on an appraisal of your home. This adds a contingency to the process, which is obviously a con as it complicates the process more.
The other thing to note on the appraisal contingency is that the appraisal is not always done immediately after signing the contract. It could be right before closing, which if the appraisal is not satisfactory the buyer will back out and you will have wasted time. If time is your biggest issue then this could create a major problem.
The other big group of cash house buying companies are iBuyers. These are large companies, such as Redfin, OpenDoor and Zillow that buy houses for cash.
A generalized overview of the iBuyer process is as follows. iBuyers make you an offer based on a computer algorithm. After you agree to the price they send out a home inspector to do an inspection for damages, issues, repairs, etc. After the inspection they deduct the cost of the repairs from the original offer price they made. These buyers also charge you a service fee, can be anywhere from 6-12% of the sales price depending on the specific iBuyer company and your specific property.
Things to note about iBuyers
An iBuyer will not be a as-is buyer, which means your sales price will be reduced by the amount of the repair costs needed for your house. Also be aware that they do charge a service fee, which is typically 6-12% of the sales price depending on the specific iBuyer and your specific property.
3. Hybrid cash buying/wholesaling companies
A hybrid cash buying/wholesaling are those companies that do both: they buy properties to flip or hold as rentals and then sometimes they assign the contract. Whether the firm buys or assigns the contract may be dependent on many factors, such as the characteristics of the property itself, whether the property meets their required criteria after doing due diligence, funding, etc.
These companies are just a mixture of the first two types of companies discussed; they do both activities based on the specific property and situation.
How Does the Cash Buyer Type Affect the Sale of Your House?
As you can see there are many different types of companies that buy houses for cash. Depending on your needs and goals one type of company might be better than the other. Regardless of which one you sell your house to, if you do, all the different types will result in a cash sale at closing.
If your main goal is selling your house quickly you may benefit from reading our article How Fast Can a Cash House Buyer Close?, which gives an overview on how fast each of the different types of cash buyers can close.
Where does Sesa Properties fit as a company?
If you are reading this article to research our company you may be interested to know that Sesa Properties fits into the third category.
We go into every deal with the intention to buy it, but sometimes things don’t fall into place or the property turns out to not be a good fit for us to hold as a company after doing due diligence. When this happens, no problem because we have a network of local cash buyers so we can find one to assign the contract to if needed and get it sold under the same exact conditions of the purchase contracts.
Regardless, if we put a property under contract we will close on it.
Sesa Properties is an investment company that uses multiple strategies to achieve our company goals and assure houses close when they are supposed to. We are not a purely wholesaling company. We do not work for hedge funds/institutional buyers. And we are not an iBuyer because of our size and hyper local focus.
Interested in Selling Your Cleveland House For Cash?
We want to talk to you. Sesa Properties is a local, trusted cash house buying investor operating in greater Cleveland, OH. As a company we are dedicated to making the selling process as expedient and painless as possible for those who need to sell a house in Cleveland. We buy houses for cash, as-is and aim to make the entire process as fast and easy as possible. If you are ready to find out what we can offer for your house click here to get your confidential, obligation free offer started.
Find Answers to Other FAQs About Selling to a Cash House Buying Company
We want to help sellers fully understand the cash buying process, whether you are selling to us or another cash buying company. We understand selling a house for cash to a cash buying company is not as common as a traditional sale. Understandably, you may have a lot of questions. We want to help answer them. Check out our cash home buyer FAQs.
If you want to learn more about us then check us out at Sesa Properties.
The information presented in this article is for educational purposes only and should not be considered legal, financial, or as any other type of advice.
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