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.
Generally, cash for home companies are referred to as equity purchase companies, due to the fact that they buy homes for cash based on the equity situation of a homeowner and since they are aware that the homeowner is strapped with an equity problem, they negotiate for the lowest price possible to the homeowner. If a homeowner is tempted to sell his home to cash for home companies, he should at least make serious research first on how these companies operate and that there 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.
This is the difference between the procedures taken by a conventional home buyer to a cash for home company, in 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 offer the following – pay cash immediately, which is always less in amount than that of the conventional buyer’s price, work on the homeowner’s mortgage, and most probably resell the home to a conventional buyer for a higher price. It is important for a homeowner to weigh things carefully with respect to accepting offers coming from a cash for home company and better to look for 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.
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