9 Things You Need To Know About Selling Your House To Home Investors
What’s In This Article
When most people sell their homes, they immediately think about the traditional route of listing it on the market with the help of a real estate agent. It’s the “mainstream” and highly effective method of selling a house, with the buyer pool typically consisting of individuals, couples, or families who are looking for a place to plant down roots.
What if we told you there was another opportunity for selling your home that might be a better fit (depending on your circumstances)?
Selling Your House to Home Investors
Home investors are people or companies that are in the business of purchasing property (often rehabbing or renovating it) and selling for a profit at a future date. Unlike a single individual or family buyer, investment buyers make their purchase decisions with the sole intention of making a profit, either by re-selling, renting the property out, or both.
In certain situations, selling your house to a home investor can work out in your favor, making it an attractive proposition. Many home investors will offer to buy your house for straight-up cash, which can be an extremely tempting deal given its simplicity and ease at which you can quickly get access to funds.
But before you make any rushed decisions and sign on the dotted line, it’s important to weigh your options. Selling to investors comes with its advantages, but there are also some disadvantages to consider too.
In this guide, we’ll cover the 9 most important things you should know before you sell this way. We weigh up the pros and cons of selling to home investors so that you can make an informed decision that is best in alignment with your needs and goals.
Without further delay, let’s jump right in….We can buy your house. Get your fair cash offer here.
1. They Will Buy Your House “As-Is”
One of the biggest hurdles of selling a house is making it look presentable and appealing to buyers.
If your house is in poor condition and has structural issues, or serious renovation work needs to be done, it can be near impossible to find a buyer on the traditional market. Further, with banks tightening up restrictions on financing, many lending institutions are requiring that even minor repairs be made before they will issue a loan to a prospective buyer.
Instead of purchasing a “project”, the majority of prospective home buyers would much rather acquire a home that is “move in ready” and requires little to no further investment in time and resources to make their own.
By contrast, when you sell to investors, they are both able and open to acquiring homes that need a little TLC. From minor repair work to full out renovations, investment buyers have the resources to restore your home to its full potential before listing it back on the market.
Many investors are in the business of flipping houses; they’ll buy a property for a cheap price, and then carry out a significant number of repairs and renovations before putting it back on the market in order to sell at a premium.
Since these ‘house flippers’ are in the home renovation business, they often get big discounts on labor, supplies, and services due to their connections in the industry and the repeat business they bring to these markets. This is why a lot of home investors are more than willing to buy a problem property. Given the right resources and approach, they see your home as a perfect money-making opportunity.
Of course, no matter who you’re selling to, you’ll make less money on the sale if your house is in a state of disrepair. But unlike a family looking for a new home, investors are much more concerned about the home’s potential than its current state.How Can I Sell My House Using ISoldMyHouse.com? Learn more
2. There’s Little Risk That the Deal Won’t Close
Selling your house in the traditional way comes with quite a few potential hold-ups and problems, including buyers pulling out at the last minute. Financing, break downs in negotiations, buyer remorse and a whole host of other issues can cause a real estate deal to collapse.
The sale of a home is a complex transaction with many moving parts, and there are a variety of scenarios that can stop a sale in its tracks. For example, a buyer’s mortgage offer can be retracted, inspections can unveil structural issues that lead to a buyer pulling out, or you can fall victim to ‘gazundering’- where a buyer lowers their offer at the last minute, right before contracts are being exchanged.
Even if it’s not your buyer pulling out, if you’re stuck in a property chain (where the sale of your home is dependent on other home sales) your house sale could still fall through as a result.
By selling to investors, however, these frustrating roadblocks can largely be avoided. Home investors are professionals and experts at their craft. They are typically straight shooters that are interested in going by the numbers and making profitable deals quickly and efficiently. After an inspection, you’ll often get an offer same day, with the potential to have cash in hand that same week.We can buy your house. Get your fair cash offer here.
3. No Hassles With the Buyer Getting a Mortgage
One of the primary reasons that home sales tend to take so long is because of hold-ups with the bank or lender. If your buyer has to borrow money in the form of a mortgage, this can end up grinding things to a snail’s pace. Worse yet, if they’re denied, the home sale can fall through entirely.
Banks deal with countless mortgage applications every day, and they can be notoriously slow to give buyers the green light on their loans. In the meantime, there’s nothing to do but sit there and wait, hoping that the sale will go through.
But by selling to investors, these delays and uncertainties can be avoided. Most investors will pay for properties in cash or have hard money financing readily available so you won’t have to worry about their mortgage applications falling through.
How Can I Sell My House Using ISoldMyHouse.com? Learn more
Pro tip: Despite the lack of a mortgage, things can still go wrong. Before you sign any agreements, make sure you ask to see proof that the investor has the funds to buy your property. If they can provide bank statements to show either cash or liquid assets to back up their purchase, then you can feel assured the sale can go ahead as planned and you won’t get caught out.
4. They Can Close Fast
For some of us, selling fast isn’t just a “want”, it’s a necessity. We may even be willing to sacrifice a lower closing price if that means we can unload our home quickly and get cash in hand now versus later. Unexpected medical expenses, layoffs from work, injuries, career changes, the need to move, and more are all common events that often necessitate a fast sale.
If you’re in a hurry, then selling to an investor is by far the quickest path forward.
NO matter if you’re moving away for work, or you need to free up equity tied to your home as quickly as possible, whatever your reasons, selling to an all-cash investor is going to seriously speed up the process.
Depending on the state you live in, the average time to close on a property when you’re selling to a buyer who needs a mortgage can range from 60 days upwards of almost 4 months (yikes). When you sell to an all-cash investor, the entire process from start to finish takes an average of just 2 weeks (sometimes days).
As soon as you and the investor agree on the conditions of the sale, the process can move forward unencumbered by pesky red tape, lenders and other hindrances.
A quick sale works in the investor’s best interest too; the sooner they close the sale, the sooner they can get to the important part- making money from the property.
We can buy your house. Get your fair cash offer here.
Pro tip: Although a fast sale works well for everyone, don’t let the speedy proceedings mean you sell for less than you’d like to. Investors are in it for the money and they can be pretty tough to negotiate with. Always have a firm price limit set in your mind, and don’t back down.
5. They May Be More Flexible
For example, imagine you’ve found yourself needing to sell your home, but you have tenants renting a room or a basement apartment and you’re tied into a contract with them. Investors will often allow tenants a grace period to find a new place to live, or they may even decide to maintain the house as a rental property and keep the tenants on long term.
Home investors may also be open to flexible payment plans if you have any special considerations such as tax liabilities to contend with. While receiving a full cash lump sum is usually an option, you can also arrange for certified funds or pre-scheduled cash payments.
Some investors even offer sellers a ‘sale leaseback’ transaction, where the investor takes over your mortgage while you continue to live there and they rent the house back to you. This is a good option if you need to release the equity in your home but you’re not ready to move out straight away.How Can I Sell My House Using ISoldMyHouse.com? Learn more
6. The Real Buyer Might Be Unknown
Many investors and investment companies work on behalf of other people (i.e. their clients). Since investors aren’t required by law to share the details of who is purchasing the property, the real buyer of the property can remain anonymous. No law says you need to be informed about the plans for your property once it’s sold, so don’t expect to get any say.
In some cases, for example, the underlying land may be worth more than the land with the existing home on it. In such situations, they may opt to demolish the home and rebuild or sell to a developer they have a connection with.
If you have a particular attachment to your home or neighborhood, it might come as a shock down the line to learn that it’s been torn down to make way for unsightly tower blocks, ugly apartments, or concrete parking lots.We can buy your house. Get your fair cash offer here.
7. They Will Always Pay Less
Perhaps the biggest downside to selling your home to an investor rather than a traditional buyer is that you will invariably get a lower offer from an investor.
Since your property can be sold quickly without waiting for the bank, it makes sense that the amount you will be offered will be less than its market value. This is how investors make their money, after all. They are always on the hunt for a bargain, and if you don’t know your home’s true market value you could end up selling it for a lot less than it’s worth.
That said, if your home needs a little (or a lot) of work, the investor is taking the risk and putting up the time, money, resources and aggravation to transform the property into something that will command top dollar on the market.
Pro tip: Consult a realtor to get an accurate picture of your home’s market value before you begin negotiations with a home investor.
It’s also a good idea to get an estimate of any possible repairs needed in your home in its current state. This will give you an advantage when investors inevitably negotiate deductions for necessary home improvements.
No commission fees!
Despite the likelihood that you’ll receive a lower offer when selling your house to an investor, there is a financial upside; no agent commission fees.
Real estate agents typically charge between 6% to 7% of the selling price of your home (unless you use a discount broker) in exchange for their services.
When you sell to investors, there’s no need to involve an agent, so you can keep the full final selling price of your home without having to make any deductions.How Can I Sell My House Using ISoldMyHouse.com? Learn more
8. What Is a Wholesaler?
You may be surprised to learn that real estate wholesalers have an entirely different business model to retail wholesalers.
Retail wholesaling involves selling large quantities of goods to retailers who then sell them on to the customer at an inflated price. Because of the amount of goods being purchased, the wholesaler can charge the retailer a much lower price, and they can make a profit when selling on to the customer.
Real estate wholesalers work in a different way. Rather than selling multiple properties together at a lower price, a wholesaler will arrange a contract with a person or company who is selling a property, and will then assign that same contract with an end buyer, typically a home investor.
The wholesaler effectively acts as a middleman, helping investors to find and close on property deals. They act on an investor’s behalf by actively seeking out and identifying discounted properties and negotiating with sellers to get the cheapest possible price.
They earn their revenue by attaching a fee to the transaction, which can either be a flat fee or a percentage of the final property price.
There are no set fees or pricing plans for wholesalers, each operates on an individual or case by case basis, but as a guide, an investor can expect to pay a mark up of around 10% when purchasing a property through a wholesaler.
For example, if a wholesaler contracts a property from a seller at a cost of $100,000, they might sell it on to the investment buyer at a cost of $110,000, and keep the difference as profit.
Wholesalers generally deal with distressed properties, since these tend to be the ones that go for below market value. Unlike house flippers, they don’t deal with any kind of renovation work; they simply connect sellers and buyers and take a commission, which is paid at the buyer’s end.
For your purposes, it is important to understand if you are going to be working with a wholesaler or a direct investor.
How a Wholesaler Can Work for You
If you have a particularly distressed or dilapidated property that you’re struggling to find a buyer for, going down the wholesaler route could be a good option.
Wholesalers have a large network of investors and can significantly raise your chances of finding a buyer.
They will work with you to come to an agreed price to contract your property for. The wholesaler will then approach their network of investors with the contracted property, adding a mark up to its value which will become their commission.
If they find a buyer happy to pay the final amount, then everybody wins. If the wholesaler fails to find a suitable buyer at the agreed price, then you as the seller have lost nothing but your time.
How Can I Sell My House Using ISoldMyHouse.com? Learn more
Pro tip: Just like property investors, wholesalers are skilled negotiators. Make sure you have a clear minimum price in your mind that you would be comfortable selling at, then stay firm and don’t let their haggling skills sway you into accepting a lower offer.
9. Be Careful with Foreign Investors
The National Association of Realtors estimates that around 3% of all US home sales were sold to foreign investors. While you may want to be open to the opportunity, taking care to do your due diligence in such circumstances is advisable.
Foreign investors are particularly keen on snapping up property deals at times when the US dollar takes a downturn on the world market. They can make deals that are financially beneficial by taking advantage of the weakening dollar and creating a higher profit margin for themselves.
While selling your home to foreign investors can be a sensible and lucrative option in many cases, there are some important things to look out for to make sure you don’t lose out.
Depending on the foreign investor’s country of origin, a cash purchase agreement could take much longer to process and close than it would with a domestic buyer. This is because non-US citizens purchasing property within the US can incur steep tax consequences in their home countries.
Sales can often be held up for months at a time while foreign investors tackle the logistics of closing the deal in a way that doesn’t create a huge tax burden.
One of the major benefits of selling your house to a home investor is to secure a quick sale, but sometimes selling to a foreign investor can be an even longer process than a traditional sale to a buyer who needs a mortgage.
A foreign cash buyer could potentially be a scam
Be aware of scammers posing as foreign cash buyers. Often, these scammers will contact sellers with a seemingly great offer, saying that they want to close on the deal right away. They often don’t want to see the house at all; they just want to purchase it as quickly as possible.
These scammers can then con you into signing an unfavorable purchase agreement, or they may attempt to pay with a false cashier’s check.
Since investors, foreign or otherwise, don’t need a license to buy and sell property, it can sometimes be hard to discern whether they are a genuine and honest investor, or you are dealing with a scammer.
Be cautious when selling your property to any investor who doesn’t want to see the property before making an offer. If you’re in any doubt, don’t go ahead with the sale or insist on full cash payment method only.
Final Thoughts on Selling your House to Home Investors
Selling your house to a home investor can a lucrative and ideal consideration if you are looking for a quick, hassle-free sale at a decent price, but it’s important to examine your options before going ahead and signing a contract.
You may save yourself a lot of time and stress, and the money you save in realtor fees can leave you financially better off, but your personal situation may also mean that selling to a traditional buyer is a better option.
By using the information in this article, you’ll be able to weigh up the pros and cons of selling your house to a home investor, so you can decide what the best option is for you.
About the Author: Kris Lippi is the owner of ISoldMyHouse.com, the broker of Get LISTED Realty and an official member of the Forbes Real Estate Council. He actively writes about real estate related topics such as buying and selling homes, how-to guides for around the house and home product recommendations. He has been featured in Inman, Readers Digest, Fox News, American Express, Fit Small Business, Policy Genius, Lending Tree, GoDaddy, Manta as well as other major websites. Read more about us here.