Percentage of cash offers have declined to 31% since the peak of 2014, so congratulations are in order if you have gotten a cash offer on your (for sale by owner) FSBO sale. But not all cash offers are created equal and before you accept the offer, there are some serious due diligence required to make sure your buyer is real.
For starters, you might be dealing with a wholesaler. “wholesaler” is a buyer who has plan to flip your house to another buyer and has no plans to close escrow on his/her offer.
So here are some due diligence steps to make sure you have a valid cash buyer:
Earnest Money Deposit: Wholesalers want to risk very little money, so they will offer 1% or less as their initial deposit. So, if you are interested in their offer, counter with 3% or more into escrow within 3 days of acceptance of your offer.
Fund’s Source: Examine the source of funds for the cash offer by asking for recent bank statements. Granted that won’t stop these Wholesalers from making offers on 10 homes, but at least if they are showing $10M of cash in the bank, it would be much easier to qualify them than if they showed only $1M.
Offer Price: If your offer is well below your asking price, you might be dealing with a Wholesalers. They offer these low prices to create more profit for themselves when they flip your home to the next buyer.
Close of Escrow: If your buyer is asking for 30 or more days to close the escrow; then you might not have a real cash offer. Unless the offer is conditioned on serious inspection or repairs being made to the property, then you should counter with a 10 day close. That is plenty of time to order an inspection and close if they are serious about buying your home.
Finally, according to National Association of Realtors, 28% of the homes sold by their owners were under-priced which is a huge loss.
So, contact us if you need help with your Silicon Valley home sale.