The 3 Types of Cash Home Buyers

There are a lot of companies that claim to buy your home for cash, but not all these companies operate the same way and with the same level of integrity. Here are some of the different types of cash home buyers that you may come across and how to determine which type of cash buyer they are. 

#1 The “Let Me Try to Wholesale” Guy

To understand this type of cash home buyer, it is first important to understand the difference between a Flipper and a Wholesaler. A Flipper is what you see on HGTV, someone that will actually buy your home and rehab the property. A wholesaler, on the other hand, will go into contract with the seller at a certain price and then seek out a flipper or landlord to buy the property for more than their contract price and they will keep the spread between the two prices.

While there is nothing wrong with wholesaling as a concept, the problem is these wholesalers will mislead sellers to believe they are actual cash home buyers even though they don’t actually have the money or intention of purchasing the property. This means that if they are unable to find another investor to pay more than their contract price, they will back out at the last minute and leave the seller with their property unsold, forcing the seller to start from scratch and scramble to find a new buyer – hardly the quick and easy sale they were promised.

Some telltale signs of someone who is looking to wholesale the property and walk away if they can’t find a cash buyer:

  • Asking for a refundable deposit.
  • Typically the offer is higher than most other investors because they have no intention of buying the property, if they can’t resell the contract they just back out.
  • Can’t provide documentation of the houses they have recently purchased and renovated.
  • No ability to provide a cash proof of funds. Ask for actual bank statements because anyone can get a letter from a bank or lender saying they are approved for a loan.
During our radio show on LI News Radio, we did a short segment about the difference between a Wholesaler and a Flipper

#2 The Highest Offer “Bait & Switch” Buyer

These investors typically offer the most for the property. However, as the deal approaches the closing date, they will renegotiate the purchase price after finding “unforeseen repairs” or other issues. Since the seller may have already made plans based on the imminent closing date (i.e. buying a new home or moving), they are left in a challenging situation where they are often strong-armed by the bait and switch buyer into accepting a lower price. What was originally the highest offer is now often one of the lowest because the bait and switch buyer knows the seller has limited choices after having rejected the other offers and a shrinking window of time to sell.

It’s one thing if certain unknown issues come back during Title or the circumstances around the sale of the property change (i.e. tenants won’t leave), but if nothing materially changes and the buyer is looking to knock the seller down on price, that’s inappropriate.

cash home buyer enticing sellers off cliff

Typically one of the roles a real estate agent plays in the transaction is to help weed out the non-serious and bait & switch buyers. However, if you are choosing to sell to a cash home buyer, you are likely doing so without a real estate agent holding your hand (and the hefty commission that comes with it!).

Some of the indicators that you are dealing with a bait & switch cash home buyer that will change the terms at the last minute are:

  • The offer was too good to be true and noticeably higher than other offers.
  • An inspection contingency that allows them to renegotiate the price after a formal inspection.

#3 The “Real Deal” Cash Home Buyer

The “real deal” buyer is a successful investor with a proven track record of success. These are also the home buyers you want to be a bird dog for. This investor’s offer will likely be in the middle of the pack in a multiple offer situation since experienced investors typically have similar pricing calculations. Their offer may not be the highest because they know how important it is to honor their agreement and don’t want to make any false promises or fail to deliver.

Many sellers choose to sell to a cash home buyer because they want a quick and easy sale, but we’ve heard plenty of horror stories from sellers who have experienced dealing with “buyers” #1 and #2 (I hesitate to use the term buyer), which infuriates us at Leave The Key Homebuyers because it gives the entire industry a bad reputation.

If you want to identify the “Real Deal” cash home buyer, look for:

  • Cash proof of funds
  • A track record of successfully purchased and flipped properties
  • Authentic positive reviews and testimonials
  • Willingness and ability to provide seller and professional references

We also wrote another article specifically about how to find the best we buy houses companies in New York in order to help ensure you find the most reputable cash home buyers in the industry.