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Cash For Your Home – Explained!
We just laid out the basics of how we buy houses for cash, but if you’re like other sellers, we’re assuming you have more questions.
If you’re still curious on more information about how we can pay cash for your house, please read on! We’ll explain everything including: a real-life case study breakdown on a house we flipped, how we craft our offers, and the difference between selling with an agent versus selling to us.
When selling your house, we’re fully aware you have several options and other companies to choose from. We lay out the process from beginning to end, with full transparency, so at least with us, you have a crystal clear view of what to expect.
Unlike other companies that can pay cash for your house, we don’t rely on your desperation or your ‘motivation’ to sell – we’ve all heard that “motivated seller” term before, right? Unfortunately, most people view that as an excuse to make an extremely low-ball offer. We don’t take into account how motivated you are to sell – or not – we make our offers simply based on our numbers below – 100% of the time.
“Okay, blah blah blah – you’re great, we get it.”
Alright, so now let’s get on to the fun part…
OUR OFFER FORMULA
After Repair Value
“Who the heck is an After Repair Value?” Let’s dive a little deeper into these terms to get a better understanding into the FOUR main elements of our cash offer.
1.) After Repair Value: Our cash offers are based on what the house is worth, after it’s all fixed up. We call this the After Repair Value, or ‘ARV’ for short. This is simply the value of what your exact property would sell for, once we fix it up to 2021 standards! (Granite, Stainless Steel, the whole 9 yards).
2.) Cost of Repairs: Now that we have this number, we need to figure out what it’s going to cost to repair the house – we call this Cost Of Repairs. We calculate this during the initial walk-through or over the phone.
3.) Our Selling Costs: Although we do purchase property without involving a real estate agent, we often re-sell the house ‘on the market’, with an agent after we’ve completely remodeled the house. So between paying our agent there, paying the buyer’s agent, AND paying for 2 sets of closing costs, we accumulate about a 10% cost (of the ending sale price) strictly in just selling the darn thing! Our team doesn’t see 1 penny of that. And don’t forget about utilities, insurance, taxes and other miscellaneous charges that accrues during the months we have the property!
4.) Profit: As much as we love buying and fixing up houses, we do have to make a little profit for ourselves as we have families and other’s to feed! Believe it or not, we aim to keep these profits to a minimum so we can better assist you and ultimately, get more offers accepted!
MORE SIMPLE TERMS PLEASE
Our offer to buy your property is determined based on the market value of the house (after we fix it up), minus ALL of our costs to fix it up (including our profits). It’s really that simple!
So there you have it! How we calculate our cash offers, 100% transparency. Now what are you waiting for! Get on out there and start flipping houses! 😉
Now…curious how a real example looks?
Let’s say your neighbor’s house is an exact replica of your house, and it was sold 2 months ago for in this condition, after they replaced the roof, updated the kitchen and bathrooms, put new appliances in, and put new flooring in.
No wonder they sold it for $250K! It looks beautiful.
ARV (After Repair Value): $250K
COR (Cost Of Repairs): $60K
Our Selling Costs: $25K (10% x $250K)
Our Minimum Profit: $20K (“Heavens to Betsy! They’re going to make $20,000?!” Keep in mind, these often take 4-6 months from when we close to when we actually sell it) 🙂
Final Cash Offer: $145K
As you can see, we make our offers based solely on the numbers and NOT based on how desperate or “motivated” you are.
Our Offer vs Selling with an Agent
Our Offer: $145K Cash, in your pocket on the day of your choosing. No fees or hassles that come with the traditional home selling process. Easy Peasy.
Selling with an Agent on the Market: Let’s say you contact a Real Estate Agent/Realtor and they tell you can sell your house for $165K in its current condition. Now, unfortunately that’s not the amount of cash that goes in your pocket. You’ll still have these fees to pay, after you sell your house on the market:
- Agent’s Fees: 6% (3% each for both buyer & seller’s side)
- Closing Costs: 2-3% (of sales price).
- Buyer’s Concessions/Repairs: 1-5% (totally depends on the buyer and their agent)
- Staging Costs: <1% (in order to sell efficiently, you’ll want to stage your home)
What are Buyer’s Concessions, you ask? Well, it’s simply just a fact that the majority of buyer’s will have SOMETHING to complain about – or, if not the buyer, the buyer’s agent (who’s sole purpose is to get their buyer the best deal). And they will almost always ask for something to be fixed or ask for a credit on the sale – this generally runs into the thousands of dollars.
I know…those were a lot of numbers. To make it easy, let’s be optimistic and say it’ll cost you roughly 10% to sell your home on the market (the current average cost to sell a home in NC as of February 2021 is around 10-14%).
Selling your House with an Agent – Cost Breakdown
Sales Price = $165K
MINUS Agent Fees (6%) = $9.9K
MINUS Closing Costs (2%) = $3.3K
MINUS Buyer’s Concessions (2%) = $3.3K
Final Take Home = $148.5K – this is what you’re left with, best-case scenario, after listing with a realtor, after months on the market.
Analyzing Your Choices When Selling Your House
So you now know what your house is worth in its current condition, meaning that if you list the property with an Agent, you would expect to sell the property around that price. You then have to back out the fees involved when listing with an Agent like we just talked about.
So now you have a decision to make – do you want $148.5K after listing it with a realtor, dealing with open houses for months on end, and that is assuming it even sells?!
Or, do you take the $145K cash offer that’s guaranteed to put money in your pocket in 10-20 days?
But WAIT! What IF…
What IF those repair costs come in lower, and instead of $60K they were $35K!
This is where it gets interesting…if you guessed we’d be able to offer you more, you’d be correct!
If we refer back to how we craft our offers:
ARV (After Repair Value) = $250K
COR (Cost of Repairs) = $35K
Selling Costs = $25K (10% x $250K)
Our Minimum Profit = $20K
In this case, we’d be able to offer you $170K!
That’s $5,000 MORE than what the house is worth in its current condition and over $20,000 MORE than what you’d get, in your pocket, if you listed your house with an Agent.
No Obligation and it’s 100% FREE. We promise.
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Why Choose Us?
When selling your house, we know you have other options. Regardless of which route you decide to take, we’d love to at least give you some advice on what to look for, and what to avoid.
Many other companies that pay cash for homes don’t take the time to craft a specific offer like we do. They will often just take a flat percentage of that After Repair Value that we talked about before, and make an offer strictly based on that. Often times, they really don’t even have the cash to close on these properties! Crazy right??
So, when selling a property, what does that mean for the homeowner? It means an incredibly low offer – they operate on a mass-offer approach. Why do they operate this way? Simple. It’s just a numbers game to them – they’ll make 100 offers and get 1 accepted. Now, we’re not here to speak poorly on other business practices. We are just simply letting you know the facts, so you are aware and don’t fall for any of that nonsense.