Part of the Fast Home Selling University educational series
In this brief lesson, you’ll learn:
- How to choose between fast cash sales and listing your home with an agent
- How to convert a home cash offer into a full market-value listing
- How to get a fair home offer in Oregon and Washington with ibuyhaus
- How Lauren Plant can list and sell homes quickly in the Portland area
- How cash home offers are calculated
The allure of rapid cash offers can be tantalizing for homeowners, but it’s not always your best choice. While they’re fast and simple, cash offers are somewhat lower than full market value because the burden of renovating and selling your home falls on the cash buyer.
On the other hand, listing your home with an agent (the “traditional” home selling method) can take months of preparation, showing your property to potential buyers, and negotiations. Choosing between these options is a frequent problem for homeowners.
The New Hybrid Home Sales Method For Portland Area
Fortunately, there’s a new hybrid approach that combines the best of both methods. Developed by property investor Dustin McGuirk of ibuyhaus.com and Portland real estate broker Lauren Plant, it provides sellers with a fast cash offer backed by the option to list for full value with Lauren’s extensive Portland buyer network.
This hybrid home sales approach allows Portland-area sellers to start by requesting a simple cash offer, and then seamlessly transition to a traditional listing with Lauren Plant if they decide that an agent-based sale is more appropriate.
Working with Dustin and the ibuyhaus team is very exciting because by combining our talents and networks, we give home sellers the absolute best of both worlds. I’m proud to know that no matter what situation a seller has, we can create a deal that meets their unique needs.Lauren Plant, Portland real estate broker
Lauren Plant is an experienced real estate broker with an extensive network of resources throughout Oregon
When Is an Agent Home Sale Better Than a Cash Offer?
Cash offers have become more common because of their appealing immediacy and simplicity. These transactions eliminate the renovations, extensive inspections, home showing, and financing processes.
However, everything has its trade-offs. While cash offers provide speed, they are usually below market value. Here are some situations when listing your home with an agent can be a better choice:
- You don’t have an immediate need for cash liquidity
- You can afford to renovate and improve your home before listing
- Your property is already in excellent condition and ready for showing
- Your property is in a very high-demand location, making an agent sale faster
- You have a strong need for the higher price that an agent sale may bring
Why Cash Offers Are Below Full Market Value
The business of fast cash offers can seem murky for homeowners, with visions of opportunistic investors buying properties for a fraction of their full worth. To understand how cash offers work, it’s essential to examine real numbers and considerations that investors make. Let’s take a closer look.
Imagine a typical older home in Portland, Oregon, that would have a market value of $400,000 if it were in pristine condition. An investor such as ibuyhaus might approach the homeowner with a cash offer of $260,000. To the uninitiated, this $140,000 gap might seem like a clear lowball offer. But let’s break it down further.
Understanding the Cash Offer Calculation
Investors base their offers on various factors:
- Repair and renovation costs: An aged or distressed property might need significant repairs. For our example property, let’s estimate a cost of $60,000 for repairs and renovations to bring it up to market standards.
- Project management costs: Selecting and managing a team of contractors is a project in itself. If you value your time at $50/hour, this might easily cost $5,000.
- Holding costs: Investors often have to bear costs like property taxes, utility bills, and loan interests while the house is being renovated and sold. For our example, this could sum up to $20,000 ($4,000 per month for an average of five months).
- Market fluctuation risks: An allowance for market variability is also required to avoid losing money. For this example, let’s earmark $10,000 (a 2.5% fluctuation).
- Miscellaneous costs: Business overhead, legal expenses, and other costs may add to $5,000.
- Profit margin: Like all businesses, investors aim for a profit for their owners and investors. For the risk and effort involved, they might target a 10% profit on the property’s potential market value. In our case, that’s $40,000.
Summing these costs, we have: $60,000 (renovation) + $5,000 (project management) + $20,000 (holding costs) + $10,000 (market fluctuations) + $5,000 (misc) + $40,000 (profit) = $140,000 in expenses.
Now, subtract this from the property’s potential market value: $400,000 – $140,000 expenses = $260,000 cash offer.
The investor’s initial offer now seems very reasonable and would save the homeowner the time, upfront expenses, and risks of doing the work themselves.
ibuyhaus has a logical and transparent process for calculating cash offers. Their Fair Price Promise assesses your home solely based on the facts: its current condition, location, necessary repairs, and the recent sale prices of similar houses in your area. Their first and most important goal is to provide clients with a clear understanding of their options without “high-pressure” sales tactics.
Whatever you choose, we hope to support you by providing valuable information and advice that will lead to the best possible outcome for your home sale.Dustin McGuirk, property investor and founder of ibuyhaus
Dustin McGuirk is a home buying expert operating in Oregon and Washington.
The Cost of Selling an Oregon Home with an Agent
Selling through an agent is another good choice for homeowners, so let’s examine that option. The agent, Realtor, or broker will advise you on what repairs and renovations to complete, and will then list your home on MLS and with their own network of buyers.
For our example Portland home (potentially worth $400,000 if in pristine condition), the financial breakdown goes as follows.
Understanding the Realtor Sale Calculation
These expenses would be paid by the homeowners when selling through an agent:
- Repair and Renovation Costs: Our hypothetical older property would require the same $60,000 of work to bring it to market standards. The homeowner would need to hire contractors and manage the project.
- Realtor Fees and Closing Costs: Real estate agents typically charge a commission, which is generally about 6% of the sale price. On a $400,000 home, that comes out to $24,000.
Summing these costs, we have: $60,000 (renovation) + $24,000 (realtor fees and closing costs) = $84,000 in expenses. Subtracting this from the property’s potential market value: $400,000 – $84,000 = $316,000 in pre-tax sales profit.
Comparing Profit: Cash Sale Versus Agent Sale
Cash Offer: Opting for a direct sale to an investor like ibuyhaus would yield the homeowner approximately $260,000, and would take a few days to a few weeks to complete.
Selling with an Agent: If the homeowner decides to work with a broker like Lauren Plant and invests in all necessary repairs, they stand to make about $316,000 and might close the deal in four to eight months, depending on market conditions.
In this example, selling with Lauren could deliver $56,000 in additional profit, meaning the homeowner would receive 79% of the final sale price, versus 65% with ibuyhaus.
The crucial tradeoff is that an agent sale would first require you to invest $60,000 in repairs and renovations, wait several months to find the right buyer, and assume the risk of any market downturns.
Should You Choose a Fast Cash Sale or a Real Estate Agent?
The good news is you don’t have to choose immediately. If your property is anywhere in the Portland area, it’s an easy and wise choice to first get the information you need before deciding. Here are the steps:
Seeking a cash offer is a risk-free first step. ibuyhaus provides a Fair Price Promise which assesses your home solely based on the facts: its current condition, location, necessary repairs, and the recent sale prices of similar houses in your area. You can request your cash offer here.
Next, consider the cash offer with respect to your current situation. Is a longer and more involved sales process worth a higher price potential?
Lastly, decide on your path. Dustin McGuirk and his team can help guide you in this choice in collaboration with Lauren Plant. Your cash offer request carries no obligations, so you are free to make the best choice once you are fully informed.
Whether you’re enticed by the immediacy of cash offers or prefer the traditional realtor-guided sale, fully understanding your choices is the most important step. If you have any questions about your home selling situation, Dustin McGuirk and the ibuyhaus team are available to guide you through the process.