What Are the Risks of Accepting a Cash Offer on My House?
The biggest risk of accepting a cash offer isn't getting less money—it's only accessing one buyer pool. Investors pay 60-70% of your home's value, while owner-occupants pay 76-84%. Other risks include dealing with wholesalers who can't close, last-minute price squeezes, and months of wasted time. In Los Angeles, these risks can cost sellers $100,000 or more.
If you're weighing a cash offer on your Los Angeles home—whether you're in Pasadena, the San Gabriel Valley, or anywhere in LA County—you're probably focused on the obvious trade-off: speed and convenience versus sale price.
But that's not actually the biggest risk.
After over a decade working with flippers, investors, and cash buyers throughout Los Angeles, I've watched hundreds of sellers navigate these decisions. The ones who regret accepting cash offers usually aren't upset about getting less money. They're upset because they didn't realize they had other options—or because the "cash buyer" who promised a quick close turned into a six-month nightmare.
Here are the real risks of accepting a cash offer, and how to protect yourself from each one. If you've already received an offer and want us to vet it—free of charge—call (213) 444-2225.
Risk #1: You're Only Accessing One Buyer Pool
This is the risk most sellers never consider.
When you accept a cash offer from an investor, you're selling to someone who needs profit margin. They're going to renovate and resell, or rent it out. Either way, they need to buy low enough to make the numbers work.
An investor will typically cap themselves at 68-69% of your home's after-repair value. Many start even lower—their "home run" offer is usually 60-65% of ARV.
But here's what most sellers don't realize: owner-occupants—people who will actually live in the home—routinely pay 76-84% of ARV, even for homes that need work. Why? Because they're relying on long-term appreciation. They don't need the same margins an investor does. They'll do updates over time and build equity.
The math on a $1,000,000 LA home:
| Buyer Type | Typical Offer | You Receive |
|---|---|---|
| Investor (cash) | 65-70% | $650,000-$700,000 |
| Owner-occupant | 76-84% | $760,000-$840,000 |
| Difference | $60,000-$140,000 |
By accepting a single cash offer without market exposure, you're voluntarily excluding the buyer pool that pays more.
Risk #2: You Might Be Dealing with a Wholesaler, Not a Buyer
Not everyone who offers "cash" actually has cash.
Wholesalers are middlemen who get your property under contract at a steep discount, then try to sell that contract to an actual investor. They have no intention of buying your home themselves.
The problem? Their profit comes from the gap between what they're paying you and what an investor will pay them. That $5,000-$30,000 "assignment fee" comes directly out of your equity.
Worse, today's wholesaling market has exploded with inexperienced operators. There are people as young as 17 running wholesaling operations. They're well-trained in having conversations and building rapport—but many fall short in their ability to properly value properties. When they miscalculate, your deal falls apart.
How to spot a wholesaler:
- Contract includes "and/or assigns" language
- Can't provide proof of funds within 24 hours
- Wants 30-60 day closing instead of 7-14 days
- Earnest money deposit is $1,000 or less (should be 3%)
- Wants to bring multiple "partners" to view the property
Risk #3: The Last-Minute Squeeze
This is the pattern I've seen destroy sellers' timelines over and over.
The worst-case scenario plays out like this: the wholesaler ties you up and continues to make excuses, elongating escrow while they search for an investor. They tell you what you want to hear. They give you false promises about closing "next week."
Then, when they can't find a buyer willing to pay enough, they come back with a last-minute price reduction request. They might ask for $25,000 off—knowing you've already made plans with that money. Maybe you've put a deposit on your next place. Maybe you've told the estate attorney you're closing Friday.
What they're really doing is trying to find another investor so they can pocket $10-20K. They truly don't care about you or your goals.
And if you refuse the reduction? They cancel the contract and walk away, leaving you to start over.
Risk #4: Months of Wasted Time
We have clients who come to us after a two to four month disaster of an escrow with a wholesaler. Sometimes six months.
That's six months of:
- Carrying costs (property taxes, insurance, utilities)
- Stress and uncertainty
- Other buyers moving on
- Life plans on hold
- Money you were counting on that isn't there
Meanwhile, the wholesaler faces zero consequences. They simply move on to the next seller.
In a normal market sale, even one that takes 45-60 days, you're making progress the entire time. With a wholesaler who can't find a buyer, you're just waiting—and the clock keeps ticking.
Risk #5: Undervaluing a Character Home
If you own a Craftsman bungalow in Pasadena, a Mid-Century Modern in the hills, or a Spanish Revival in Highland Park, there's a specific risk you need to know about.
Character homes—Tudor, Craftsman, Mid-Century Modern, Victorian, Spanish Revival—trade 10-15% higher than standard properties in Los Angeles. Buyers pay a premium for architectural details, original features, and neighborhood character.
Wholesalers and investors know this. They run their standard formulas, make their standard lowball offers, and hope you don't realize your home commands a premium.
If your property has architectural significance, a single cash offer is almost certainly leaving more money on the table than a typical home would.
How to Mitigate Each Risk
The good news: every one of these risks is preventable.
| Risk | Protection |
|---|---|
| One buyer pool | Expose to market, even as-is, to reach owner-occupants |
| Wholesaler | Verify proof of funds, require 3% earnest money, refuse "and/or assigns" |
| Last-minute squeeze | Work with verified buyer, short contingency periods |
| Wasted time | Require 7-14 day close or walk away |
| Character home discount | Get proper valuation that accounts for architectural premium |
The simplest protection? Don't accept any offer without understanding your options.
When Cash Offers Make Sense Despite the Risks
I'm not saying cash offers are always wrong. They make sense when:
- Severe property condition makes traditional financing impossible
- Timeline is truly urgent (court deadline, coordinated purchase)
- You fully understand the trade-off and value convenience over maximum price
- The buyer is legitimate (verified funds, 3% earnest money, 7-14 day close)
But that decision should be informed. You should know you're accepting 70% when you could get 84%. You should know you're leaving $140,000 on a $1M property—and decide that's worth it for your situation.
What you shouldn't do is accept a lowball offer because you thought you had no other choice.
See Your Complete Range of Options
Before accepting any cash offer, understand all 4 paths forward. Our free consultation shows you:
- What a legitimate cash buyer would actually pay
- What your home would sell for as-is on the open market
- What light preparation would yield
- What full market exposure would bring
Real numbers. Your property. No obligation.
📞 (213) 444-2225 · ✉️ [email protected]
Frequently Asked Questions
What's the biggest risk of accepting a cash offer?
The biggest risk is only accessing the investor buyer pool, which pays 60-70% of value, when owner-occupants pay 76-84%—even for homes that need work. On a typical LA home, this gap represents $60,000-$150,000 or more.
How do I know if a cash offer is legitimate?
A legitimate cash buyer provides proof of funds within 24 hours, puts down 3% earnest money (non-contingent), and can close in 7-14 days. If they need 30-60 days, require assignable contracts, or put down minimal earnest money, you're likely dealing with a wholesaler.
Can a cash buyer back out of the deal?
Yes, especially if they're a wholesaler with contingencies built into the contract. Wholesalers often cancel at the last minute when they can't find an end buyer, leaving sellers stranded after months of wasted time.
Is it risky to sell to a "We Buy Houses" company?
Many "We Buy Houses" operations are wholesalers, not actual buyers. They intend to sell your contract to an investor, not purchase your home themselves. Verify they have proof of funds and no assignment clause before signing anything.
How can I sell my house fast without the risks of a cash offer?
Expose your property to the full market, including owner-occupants. Even as-is listings attract buyers willing to pay more than investors. A 30-45 day market sale typically nets $60,000-$150,000 more than an off-market cash offer.
This article provides general information about real estate transactions in Los Angeles County. Every situation is unique. Consult with qualified real estate, legal, or financial professionals for advice specific to your circumstances.
