A house investor might be able to provide additional value to the sale process of your home such as a faster closing, but is it worth it? Let us evaluate what it means to sell your house to an investor.
Should You Sell to a House Investor? (An Analysis)
Are you thinking of selling your house? If yes, the question ‘should I sell to an investor or an actual buyer’ must have crossed your mind. You’ve likely already done the analysis of whether you should rent or sell your home.
Selling a home is no joke, and you want to avoid scams and bad offers as best as you can. There are many pros and cons to both house investors and buyers.
Consequently, there’s a lot you must consider.
If you’re completely new to the real estate world, don’t worry.
In this article, we’ve listed out everything you need to know about house investors, so you can make an informed decision regarding your property.
Who is a Home Investor?
House investors are people or companies that buy houses with all cash. Unlike buyers, the investors don’t intend to live in the house once they’ve bought it. Instead, investors then sell the house to buyers for a higher price (after fixing them up).
Being a house investor is a nice gig. Most investors make about $100,000 per year, with experienced investors making up to $170,000.
Moreover, another thing you should know is that investors have four main strategies:
- Buy and hold
- All-three (Buy, Flip, and Hold)
Buy and Hold
Not all investors sell their properties immediately. Once they’ve bought it, they may choose to hold the property for a while. You’ll see this as a common strategy amongst new house investors.
While they’re trying to expand their real estate portfolio, they’ll rent that property to someone as a means of side income. 32% of all investors rented out their property in 2018.
Investment companies may also choose to ‘hold’ the property to expand their portfolio.
However, they may also hold the property (without renting it) until stock market conditions improve.
As mentioned, investors fix up houses before selling them to increase their value. This happens more frequently with older properties.
Companies or individuals have them renovated. Depending on the number of renovations made, they set a new selling price, profiting off the value-add.
See Related: Best Books About Flipping Houses
All three (Buy/Flip/Hold)
This is a combination of the above strategies. A real estate investor will buy your property, renovate it, and then hold it (until they have developed a big enough portfolio and/or the market has improved.)
Similar to the buy-and-hold strategy, companies will rent out properties will they’re holding them after the renovations have been made.
Again, this is more common with older properties.
Lastly, we have the ‘wholesale’ strategy, which means the house investor buys the property with the goal of reselling it quickly.
Usually, an investor will buy a house at below the market value and then sell it to another investor for a better price.
Wholesale investors don’t flip the house before selling it. The goal is simply to sell it as quickly as they bought it.
What’s the Process of Selling a House for Cash?
Before you even let a house investor and/or buyer look at your place, what are the things you need to do?
For one, you need to get a listing agent. If you don’t know, a listing agent is your representative in the market. They’re responsible for getting you the best offer possible. At the same time, they help you avoid any scams.
How? Well, it’s through the second step. After getting a listing agent, you need to find out the market value of your home. The market value of your home depends on many things.
For example, you need to check your home’s:
- Age (and historical value)
- Structural condition
- Past upgrades/renovations
- Distance from nearby schools, stores, public transits, workplaces, and recreational centers
You can perform a comparative market analysis, and depending on the result, set your price accordingly.
Calculating an accurate price is very important. You don’t want to get scammed into selling for a lower price than your house is worth.
However, keep in mind that the price also depends on the hotness, coldness, or neutrality of your current market. If the economic indicators (such as the employment and wage growth) in your area are down, you’re going to have to negotiate a lower price.
After you’ve calculated your home value, you can decide whether you want to sell to a house investor or a buyer.
Then, do a gut check by using these free resources to determine the appropriate market value for your home.
The home investor will likely say that offering cash results in a lower price. Don’t take them on that suggestion.
You want a market value.
- Zestimate by Zillow
With DealCheck, you can run your property through their analysis tool to get a second opinion on the market value of your home and potential “value” the buyer sees in your house.
Five Reasons People Sell to a Home Investor
There are many reasons people choose to sell to an investor rather than a traditional buyer. Let’s explore some of them and see if any apply to you.
In essence, you’ll probably want to sell your house to an investor if:
You’ve inherited a property
Sometimes, people are left with properties they don’t intend to use. In such cases, it’s better to sell to an investor instead of letting the house sit empty.
Unless you check up on it frequently, an empty house is a good target for vandalism.
Moreover, if you let a house in your name sit empty for a long time, you may have to pay different taxes even when you are not using it.
See Related: How to Get a HELOC on a Rental Property
Your house is in bad condition
If your house needs lots of renovations and repairs, buyers won’t be interested. However, house investors actively look for places in bad conditions, so that they can flip it and resell it.
Consequently, you can look for investors who specialize in ‘house-flipping’ or ‘buy-flip-hold’ strategies.
You need to avoid foreclosure
Thirdly, you can sell to an investor if you’re behind on mortgage payments. Instead of looking for mortgage specialists (who take additional fees), you can cut your losses and sell your house.
Since interested investors are easier to find than interested buyers, the selling process is much quicker.
You’re dividing assets in a divorce
Another reason to sell to an investor is divorce. Most divorce proceedings require quick settlements of all combined assets. Consequently, it’s not a bad idea to sell to a house investor.
See Related: What Does it Take to Retire on Rental Income?
You need to sell quickly
As mentioned, selling to real estate investors is much quicker than traditional buyers. Whether it’s for divorce or foreclosure, you can get an offer very fast.
Moreover, if you’re relocating because of your job or are in the process of buying another home (or both), you may want to sell to a house investor.
New jobs typically require a quick move while buying a new home requires proof you’ve sold the last one. Consequently, in both cases, a quick sale is necessary.
How to Sell Your Home to an Investor
While the process may seem hard, there are only a few steps for you to follow. However, keep in mind, you need to make an informed decision regarding each step.
Make sure to do your research and hire professional help where needed.
In any case, these are the steps to follow (after you’ve selected your listing agent and calculated your market value):
Actively Look for Investors
Once you’ve calculated your house’s market value, you know your home’s worth and selling price. With the help of your listing agent, you can look for investors in your local real estate investment firms and organizations.
You can also look for house investors online. Many have verified websites and pages on online platforms. Moreover, many house investors also put ads in newspapers and on television.
See Related: 5 Tips for Selling a Property at a Loss
Hire a Lawyer
Once you’ve found interested investors, they’ll make you several offers. The listing agent may assist you in negotiating the price. However, you need a lawyer to help you go over the sale contract.
If you don’t already have one, look for one in your price range. Additionally, you can even ask your listing agent to make some recommendations.
Make Everything Official
Once you’ve found a lawyer, make sure everything’s good.
Having a legal expert look over your documents is especially important when you’re selling because of:
- Financial problems
Moreover, if you ever plan on rebuying the house, you need to ensure that the contract doesn’t prohibit that.
What Are the Benefits of Selling Your Home to an Investor?
Now that you know what house investors are, and what the process is, what are the pros of selling your home to an investor? As mentioned, selling to an investor is more time-efficient. However, what else is there?
You can sell your house as it is
With normal sales, you have to make a lot of preparations.
For example, you need to clean/organize your home before listing a picture on your sale ad.
For normal sales, most homeowners spend more than $6570 for home preparation to list photos, doing:
- Paint jobs
- Deep cleaning
- Carpet cleaning
- Lawn work
Therefore, with investors, you can easily avoid this. Further, with iBuyers, you rarely need to list your home or accommodate buyer showings.
Consequently, iBuyers are far more convenient.
With traditional buyers, you have to wait at least 45 days before finalizing a sale. This period is for the new buyer to perform:
- Electrical inspections
- HVAC inspections
- Foundation appraisals
- Gas and chemical appraisals
- Wood Damage/Mold inspections
- Water systems inspection
The period is also for meeting previous home contingencies. For example, a buyer may want to give his/her previous landlord the standard time to find a new tenant.
This is not a concern with house investors.
Another thing about house investors is that they usually pay all-cash upfront. You don’t have to worry about the buyer’s appraisal.
If you don’t know, an appraisal is a report, basically a summary of all the inspections performed (mentioned above).
The appraisal helps determine the property value, and if it comes in low, you have a problem. By dealing with investors rather than buyers, you can avoid this stress.
Simple Process and Transactions
Lastly, the entire process is very simple. Even showing them the house is simpler because they’re not interested in emotional attachments. Consequently, they’re only interested in how much money they have to put in to make repairs and such.
The final offer takes into account repairs and closing costs (such as title fees, insurance fees, and taxes). Traditional buyers ask you to take care of such things.
Therefore, with home investors, you don’t have to worry about anything.
Also, the closing process is even more flexible. With buyers, they’re the ones deciding the closing date based on their convenience. With investors, on the other hand, you have more freedom.
Investors even let you leave behind items you no longer need. Therefore, you can finally rid yourself of any useless furniture or appliances.
What About the Disadvantages?
To finish our analysis, let’s talk about some of the cons of selling your home to an investor. As mentioned, there are many perks of selling to a house investor.
However, you risk dealing with some of the following:
Selling Your House for a Low Price
House investors, whether they’re individuals or companies, give you a fair deal as per the market value of your house. However, you’ll always get more money from a traditional buyer.
Although, you should consider the expenses that are cut down when you sell to a buyer:
- Preparation costs (including putting up listing photos, staging, painting)
- Necessary repairs
- Appraisal costs
Real Estate Investing Scams
Not all real estate investors are authentic. This is because house investors don’t need proper certification and documented credentials like real estate agents and lawyers.
To avoid such scams, simply:
- Contact their main offices using the contact information provided in their advertisement.
- Go through their website and other online platforms.
- Also, ask them about their recent purchases and request relevant documents as proof.
- Check out online reviews and testimonies.
- Lastly, do not give the investors any money and never without an escrow agent/lawyer as a buffer.
See Related: Real Estate Due Diligence Checklist
House investors are becoming increasingly more popular than traditional buyers. Real estate investors account for more than 70% of rental property in the US.
At the same time, traditional buyers are expected to double by 2025.
Consequently, the answer to the question ‘should I sell my property to an investor’ strongly depends on your situation. There are many perks to selling to a house investor (as long as you’re careful and avoid scams).
However, is your priority getting the highest offer you can? If yes, buyers are more flexible with negotiations.
On the other hand, is your priority selling your house quickly and with little obstacles?
In this case, a house investor is the better choice. To decide, think about what your situation calls for.
We hope this article was helpful and informative.