Why You Shouldn’t Sell You Home “For Cash As Is” to a Private Company

Hello, and welcome to another edition of the WRX Propetry Group real estate blog! Today we’ve got a fairly timely topic to discuss.

It’s an issue that, by now, you’ve probably encountered at least once or twice (because it’s an issue that’s designed to be encountered repeatedly).

We’ve all seen signs pop up upon a sidewalk. We’ve witnessed the stickers at the stop lights, or the posters in any of the many places posters might be put. I’m speaking, of course, of the recent trend of “Cash As Is” advertisements: groups or individuals putting out the offer to buy your home quickly.

These advertisements are becoming increasingly ubiquitous, and perhaps most egregiously of all, you might have discovered a certain letter in your mailbox (designed to look handwritten but clearly printed en masse), or even had someone come to your door knocking or giving you a cold call.

There’s always the familiar refrains: “WE BUY HOUSES;” “CASH OFFERS,” “AS IS,” and of course, “FAST!” So: what’s going on here?

What’s wrong with selling your house as is, quickly, for cash? Is it a bad deal?

The long story short is: well, it depends. The bottom line is that it's very important to understand the situation you're dealing with and the offer you're potentially accepting.

There are pros and cons to this arrangement. In some cases, it's possible that it can work out great. In other cases, it can be a sour deal.

In this article, we'll take the skeptic's side and go over what to watch out for, what the red flags are, and how to avoid the pitfalls of such an offer.

Here's what we'll cover:

• Get Help with Selling as Fast as Possible
• Is "Cash As Is" a Scam?
• The Why’s and Why Not’s
• What’s the Alternative?
• Why Do People Go For "Cash As Is" Offers?
• The Bottom Line

Is "Cash As Is" a Scam?

First and foremost: is it a scam? It isn’t a textbook definition of a scam. Strictly speaking, they are not lying to you, and in most cases the buyer genuinely will do what they advertise: if you give them the chance, they will buy your home

Having said that, though, we want to reiterate that this is not a good idea. Just because it wouldn’t necessarily qualify as a textbook example of a scam, doesn’t mean it’s in your best interests whatsoever. Whether or not it qualifies as a scam, we really would not call it an opportunity, either. If you’ll join us, we’ll now do a bit of a deep dive into the “Why’s” and “Why not’s.”

The Why’s and Why Not’s

By and large, these are usually investors. This can mean private buyers looking to add homes to their portfolio, or investment companies doing this for a number of investors on a larger scale.
Alternatively, this can mean home flippers who want to buy a home, renovate it, and sell for a (sometimes significantly) higher value, or renovation companies who do the same on (once again) a larger scale than regular home flippers.

Because these buyers are usually investors or contractors, it goes without saying that their main interest is their bottom line: they are motivated by making a profit off of your property.
Let’s pause to make something clear: there’s nothing inherently wrong there. Indeed, there are plenty of investors in the market who create or maintain incredible real estate projects, putting in work to move our city forward. None of this is to take away from investors and from those who work to grow their portfolio.

The issue with these letters, posters and proffered services is the “fast cash” strategy. When paired with aggressive marketing, it starts to make its way ever closer to the “scam” end of the spectrum.

The reality is that homes already do sell fast when selling them the conventional way, with a realtor, and with the steps and processes that have been put in place to protect you. The supply of homes has been extremely low for a long time, and it remains low to this day. A surprising number of homes sell the same day they are put on the market, and even when that isn’t the case, barely any listings last longer than a few days without generating offers and culminating in a sale.

So to go back to what these letters are offering, the “fast” angle does not really add any value at all, considering that these “services” are being offered in a market when a property can sell profitably in mere days.

What this can do — and again, we are not saying this is always the case — but what it can do is create a situation where the seller is rushed into a decision they’re not fully comfortable with by a high pressure buyer, and without recourse to a professional protecting their interests.

In some cases, this can be sales pressure, plain and simple. In some cases (and these are the more troubling scenarios) people employing these tactics can end up leveraging the fact that the seller might be in a hurry, for whatever reason.
This can lead people to feeling cornered and pressured into making a very big decision in an unduly short amount of time. This is very seldom to their advantage. We’ve written about how we work to sell your home fast, but there’s a difference between speed that allows for informed decision making and speed that takes away your ability to think things through.

Beyond that, since these companies are motivated by profit, and especially since it’s within the “quick cash” context, it’s likely that the offer buyers receive will be very low. Again, we’re not saying this is always the case, but if you break it down, it doesn’t look great:

• These groups are incentivized to maximize profit.
• The lower the cost to the investor, the higher the yield
• The lower the cost on a fixer-upper, the higher the profit when it’s flipped

Because these transactions are designed to be done rapidly, there’s simply not enough time spent on analyzing the property to get an accurate estimate for the market price of the home.
Furthermore, because sellers would be dealing exclusively with these “fast cash groups,” there won’t be an offer process where you can attract buyers and get bids, and afterwards negotiate and nurture the best offers. There’s not enough time, and there’s not enough attention.

Ultimately, real estate agents are there to protect sellers when it comes to the details of the transaction. And with these fast cash offers, you will not have a realtor by your side to help you out: indeed, they are designed that way.

What’s worse is that they might actually have one fighting on their behalf; indeed, they might even be realtors themselves. All of this combines to stack the odds against you.

For example, when it comes to fixer-uppers, if the seller is not personally construction-savvy, a high-pressure sales person could bully them into accepting a lower price than they could expect otherwise.

When you dissect the situation, you begin to realize how much there is that can go wrong in this hypothetical situation. Yes, you will get what you were promised: a fast sale for cash.
Just like that, your home will be sold. But at the end of the day, it won’t be a great sale, and it won’t be one done on your terms. To reiterate: there is really no need to go down this path as homes already do sell fast (and they continue to sell fast) under normal circumstances, anyway.

What’s the Alternative?

So, with all that said, what should you do to get your home sold quickly? Our recommendation is to work with an experienced realtor.

For example, here’s a quick outline of what we do for clients:

• We will put in the research to get an accurate home value
• We will market the home for maximum interest with the most compatible buyers
• We will navigate the logistics of the move
• We will negotiate on your behalf to protect your interests, to maximize the price you get, and to arrange the shortest/ideal closing timeframe

Why Do People Go For "Cash As Is" Offers?

We’re starting to wind down here, but as the final facet of this deep dive, let’s also look at what might lead people to working with the “fast cash” people.

Distrust of Realtors - Adopting a healthy bit of skepticism about salespeople is understandable, and some people may have had bad experiences in the past. To this end, the allure of a private buyer might be that it’s a way to bypass working with a realtor.

And of course, that’s true. But the logic doesn’t really stand up to scrutiny. Just because the private buyer is not a realtor does not guarantee that the deal is any good, or that there are no bad experiences to be had, or that they are going to “play fair.”

In fact, we’d say the opposite: as a core part of the industry, real estate agents are heavily regulated, and this regulation is upheld and enforced by local, provincial, and federal bodies.

Real estate agents are trained and tested because they need to be; they take part in ongoing education, and they abide by strict rules.

A private buyer who isn’t a realtor isn’t subject to any regulatory standard. And if they are a realtor, you might want to ask why they’re going about things this way.

While some people might not see realtors as their favourite option, it’s simply not accurate to say that the private “fast cash” route is a better bet.

Ask yourself: who is this person accountable to? For the realtor, accountability stretches from the regulatory boards, their own business and reputation, and, most importantly, you.

Cost of Paying Commission - This is another fair point: commission is expensive. But so is getting an unrealistically low offer on your home. Being pressured into an unfavourable sale means not only less money upfront, but far less down the line.

Yes, a real estate agent receives a commission on the sale, but that same real estate agent can also help maximize the size of the offer you get by attracting the right buyer or by negotiating multiple bids, more than making up for commission costs: your interests are quite literally aligned, unlike dealing directly with a private buyer.

Closing Times - This is worth considering, too. The most typical closing timeframe is 3 months from acceptance of the offer. For some people, that might seem like an unacceptably long time.

It’s true that some people might prefer closing within a month or less, so someone offering you cash right now can certainly be tempting.

But then we end up back to what the realtor can and will do for you: it’s part of the realtor’s job to negotiate a shorter closing time for you, ensuring you find the buyer who meets all of your needs, from price to timeframe.

Part of it is the negotiation, part of it is finding the right flexible buyer. And it is worth remembering: in this hot market, sellers are at an advantage, and therefore can negotiate from a strong position.

The Bottom Line

Last, but not least, even if you are absolutely dead set on working with a “fast cash” offer (perhaps you liked the way they dotted their “i’s” and crossed their “t’s” on their mass-produced advertisements), you can still hire a realtor to represent you in the transaction.

This will ensure that any attempts to take advantage of you will fall flat, and that you will get as fair price as the circumstance can allow for. Beyond that, the realtor will make sure the details and logistics of the transaction pan out smoothly for you.

So, to reiterate: we strongly caution against going down this route, but if it’s what you choose, we can help protect your interests.

As our final little word of wisdom, whichever way you end up deciding to sell, please make sure that you take the time to carefully consider the options, weighing the pros and cons, and that you get an accurate estimate for the value of your home.

Selling your home is always a huge decision: it can be enormously profitable to you, but it can also lead to regrets if you’re not careful. Ultimately, you want to make sure the transaction is truly set up to benefit you and meet all of your needs.

That’s it for this subject — if you have any more questions, please do not hesitate to to contact us.