If you own a home, chances are, over the last 6-12 months, you’ve received phone calls, text messages, or even postcards from inquiring parties who want to purchase your home. Often, those offers come in sounding too good to be true with the added bonus of the words, “all-cash offer.” These communications are coming from investors and buyers who are hunting for real estate deals, exploring various tactics to find off-market properties,
As strategic guides for homeowners in North Atlanta, we advise taking unsolicited cash offers isn’t the best choice for homeowners who want top dollar for their home, especially if you haven’t considered all the other paths available to you.
To help you make the best decision, here’s a guide on the different types of unsolicited buyers, what’s happening in the market to cause them to reach out to you, and the risks of accepting these types of offers.
Different Kinds of Unsolicited Buyers
Investors: Investors have been known to approach homeowners with both unsolicited and solicited cash offers. Generally, they’re interested in either fixing and flipping homes or purchasing them as rental properties. Like wholesale buyers, they tend to offer less than market value as a way to profit from their purchases.
Wholesalers: Wholesalers search for properties for real estate investors who wish to avoid the effort of finding homes. These investors complete the bulk of the work; they approach homeowners with unsolicited offers and negotiate a below-market price for it. The buyer then pays the wholesaler an agreed-upon percentage of the purchase price, also known as a finder’s fee, which is usually 5-10%. The negotiated price between the wholesaler and homeowner generally needs to allow for both the wholesaler and the investor to profit off the sale.
Buyers & Agents: Lastly, not all unsolicited offers come from investors or wholesalers looking for the best profit potential. Real estate agents and their home buyers may also approach property owners with unsolicited offers, especially in competitive markets where the housing demand is much greater than supply. A buyer may send out these offers to make an off-market deal directly with a seller and avoid bidding against competing buyers. Alternatively, they may also make an unsolicited offer to target a specific dream house or neighborhood. These types of buyers may be a cash offer or an offer backed by financing.
Inventory Shortage is Driving Unsolicited Buyers
The reason homebuyers and investors are directly approaching homeowners is due to the current supply and demand in the real estate market.
We’re still very much in a seller’s market.
There simply aren’t enough available homes on the market today. Even before the start of the pandemic in 2020, 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 our current seller’s market, where buyers find that they’re competing against multiple offers to purchase a home.
Buyers today are not only facing low inventory but rising home and mortgage rates as well. These factors make it difficult for many to purchase the home they’d pictured themselves buying. The current median home price in the United States has risen over twenty percent in the last two years, up from $329,000 in the first quarter of 2020 to $408,100 at the end of 2021.
What does this mean?
The strong demand from buyers, lack of inventory, and additional rise in home prices may help explain why more homeowners are receiving offers from investors and other types of buyers. These unsolicited offers are intended to go directly to the source — unsuspecting homeowners.
Beware: Unsolicited Offers Are Often Below Market Value
Why the concern about unsolicited offers? Homeowners need to understand that because property investors are looking to make a profit on your home, you can expect an unsolicited offer to be lower than if you were to list your home with an agent or your local MLS.
Many cash buyers are willing to purchase a home as-is, with no expectation of repairs, no staging, no pre-listing home preparation, negotiation period, or even a shorter close of escrow. If you’re approached with an offer from someone who wants to live in your home, you’re more likely to get a price closer to your home’s actual market value. It’s a high chance that this buyer isn’t concerned about buying low enough to make a profit but instead wants to avoid competing bids from other buyers and the opportunity to purchase a home they love.
Sellers can benefit from cash offers from investors if the ease and speed of closing the sale matter the most. But like many things, if you’re buying for convenience, you’re taking less money. Or the value of what you’re getting for the money is put at risk. Buyers who wish to have a full-service real estate experience are better suited to working with a guide who will put their priorities first. Reach out today to start a conversation!