What to Expect When Selling Your Home to an Investor
For buyers who have a requirement of selling their house as
quickly as possible and acquiring cash from the sale, selling to an investor might seem good. However, the quickness of the process and the on-the-spot cash deal that comes with selling your house to an investor might seem too good to be true. But you can rest assured that selling to an investor truly is as easy and quick as it looks.
If you are looking for a similar kind of deal, there are certain things that you should expect from the process. This article brings you information on all of those things, from the way your property will be evaluated to the pros and cons of dealing with an investor.
What to expect from the pricing of the home?
It is important to remember that an investor buys a property purely for business. Thus, it is very likely that you will not get the full market value of the house. So, how do investors evaluate a house exactly?
The investor's goal is to determine the economic value of the house that they are buying. Thus, you can expect complete transparency in the evaluation process.
There are different approaches that the investor may employ to evaluate a property. For example, commercial and rental properties may take an income-oriented approach where the value is calculated on the basis of how much income the property is generating.
On the other hand, a sales comparison method utilizes the rates of similar properties that have been sold recently in the same area to calculate the approximate value of the house with respect to factors like the locality, repair and renovation requirements, etc.
In simpler words, when it comes to the cost, you can expect a 65%-75% of the house's market value at the most. Real estate investors may deduct a percentage from the total asking price to cover the repair/renovation and closing costs.
What are the advantages of selling your home to an investor?
Even though it is a known fact that you cannot really get the full price of your property if you sell your home to an investor, there are some advantages that make it a good idea to do so.
Here are some essential advantages of the process that cannot be overlooked;
You can deal directly in cash
Investors make direct cash deals. This reduces the load of complex paperwork. This also means you are spared the seller's concessions that a buyer asks to cover the closing costs. Unlike the traditional buyer, investors directly calculate the prices after deducting all kinds of repairing and paperwork costs and give you the final price in cash.
No need to give real estate agents any commissions
Usually, during a traditional real estate deal, at least two real estate agents are involved- the buyer's agent and the seller's agent. After the deal has been closed, a percentage of the home's price is paid to both the agents as commission.
When you sell your house to an investor, there is no need to hire a real estate agent. Since there is no agent, the need to pay the agent's commission is also eliminated.
Skip the hassles of repairing
Making essential repairs in your home can be both physically and financially exhausting. But you cannot really avoid the repairs if you are looking for real estate deals and want to attract potential buyers.
If you are one of those home sellers who want to sell the house as soon as possible and skip the repairing part, selling your home to a real estate investor might be one of the best options for you. Investors do not expect you to make repairs in the house and buy it as-is. Rather, they simply just deduct the repair costs from the total price of the house and give the 'wholesale value' of the house to the home seller.
A traditional home sale can be time-consuming. The selling process is a lengthy process that includes finding an experienced agent, listing the house, waiting to find the right buyer, a lot of paperwork with real estate professionals, home inspections, repairing, cleaning, and a lot more beyond that.
Thus, if you are in need of quick money or need to move out quickly for a specific reason, for example, a sudden job promotion to a new city, selling your house may become a daunting take for you.
In this scenario, one of the best things you can do is to opt for a home sale to an investor. Investors are especially known for their quick dealings. They handle the paperwork, debts, and repairs for you. They even make as-is deals where they buy homes that need a lot of repairs. After a quick closing, they also pay the home seller on the spot, in cash.
The drawback of selling to an investor
By now, it must be clear that there is one disadvantage of selling your home to an investor. Since investors handle everything themselves and pay for any fees or charges that may arise during a real estate transaction, they cannot pay you the market value of the home. The best they can do is give you a 65%-75% of the asking price. They calculate the price of the house on the basis of how many repairs it needs since they have to spend money to fix all the necessary things in the house. After you have made an offer, they calculate the repairing costs and deduct the costs from the price.
To make sure that you still get the most out of the transaction, there are certain things that you can do. For example, you can show them data related to recently sold properties in the area that are similar to the one that you are selling and prove that your home is valuable enough.
However, you still need to remember that you should only expect a realistic price for your home, and investors have nothing to do with the market value of your house.
When should you explore the option of selling to an investor?
Now that you understand how the prices for properties are calculated by investors and all the advantages and disadvantages of selling your home to a real estate investor, you may now want to know the specific situations that lead people to explore this option even though they are aware of the fact that they will not be getting the market value of their house.
So, here are three situations in which selling your house to an investor will make more sense than getting it listed through a real estate agent and opting for a traditional home sale.
If you are facing a foreclosure
One of the biggest reasons home sellers opt to sell their houses to a real estate investor is that they might face foreclosure. Foreclosures can damage your credit scores, and usually, recovering from such damage is very difficult. Thus, it is advisable to save yourself from foreclosure if you are on its edge.
In a foreclosure situation, selling your home to an investor can help you significantly. Since you can get a quick closing date when you are selling your property to an investor, you can easily make a significant amount of quick cash and avoid foreclosure to save your credits.
If you have inherited a house
Sometimes people inherit houses that are difficult to maintain. If you are in a similar situation where you have inherited a very old house that is either unlivable, is beyond repairs, or is becoming a burden for you to maintain, why not take a chance and sell it for some good money?
If your inherited house is in a locality that you don't know much about or you are unable to move into it because of your already set and sorted lifestyle, selling the home to an investor might be the best idea since the investor will buy it as it is.
If you need quick cash
If you are in need of money and you need it quickly, selling your home in the traditional process may not be a good option for you as the process for the sale will take a lot of time. Meanwhile, investors can provide you with a quick closing date that can be followed by an on-the-spot deal that involves cash transactions.
When you opt to sell your home to an investor, you also don't have to go through any complex paperwork. In fact, the investor handles the paperwork and transfer tax for you. They also don't depend on home inspection reports and reparations to close the deal as they willingly invest in properties that may not be in great condition but have the potential to become better with some fixing. These factors make dealing with a real estate investor much more convenient and quick.
Some points to remember when selling your home to an investor;
if you are opting to sell your house to a real estate investment rather than getting it listed through a real estate agent in the usual way, you need to remember certain tips and points to make the most out of the deal.
These points can also be seen as some of the essential things that you can expect when dealing with a real estate agent. Some such points to remember are;
You don't need to worry about the cleaning part
Unlike the traditional buyer, investors don't buy homes to live in them. Thus, they do not care much about the clutter, heaps of trash, or any possible thing in the house that needs to be 'cleaned'. Their main focus is on the condition of the house's structure and the potential that it has. Investors usually take help of a home inspection to take note of the potential repairs that the property will need and calculate all the repair costs. So, if you are selling your home to an investor, you don't really need to take the burden of a thorough cleaning since the investor will opt for an 'as-is' home sale.
The closing will happen very quickly
If you are selling your home to an investor, be prepared for a quick sale. Home sales involving an investor don't involve a lot of paperwork. Most of the paperwork is done by the investor or the investment company so that you don't have to go through the unnecessary hassles. This makes the selling process quick, and your home sells faster than when you opt to deal with traditional home buyers.
You can meet as many investors as you want
One of the most important things to remember while selling your home to an investor is that you can choose to meet as many investors as you want and then decide who you want to sell your house to based on the best price you get. For example, you can search for the best buyers online and schedule different dates for different investors to come and visit your home before a final walkthrough and sale. You can also opt for bidding wars if you have multiple investors interested in your property. Interestingly, some homeowners might go with the best offer they get among multiple offers but some others might go with a buyer with who they connect. Whatever your decision may be, remember that you are 100% entitled to make the decision about your own property.
Ask them their pricing method
Real estate investors have a specific method of calculating the price of a home since they do not actually go with the market value of a house. They look for all the potential repair requirements, deduct the repair costs and closing costs, pay off any remaining debt to the mortgage lender and then decide on a final sale price. So in simple words, real estate investors pay you a percentage of the after repair value of the house and not your home's sale price.
However, it is important to remember that investors can secure home repairs at a price that is lower than the retail prices. This means the repairing costs become minimum for them. In fact, the repair costs might even be significantly lower than the prices that you would have paid if you had made the necessary repairs yourself to attract buyers. So, make sure to ask your potential buyers how they calculated the prices of your house and expect them to maintain transparency for a successful home sale. You can take the help of a real estate attorney for the purpose if necessary.
Investors aren't emotionally attached to the property
When you have a real estate transaction with a potential buyer that is buying the house to live in it, it is natural that there will be a lot of emotions involved in the process. Since buying a home can be big deal for most buyers, both financially and emotionally, they are careful about everything and have every detail of the house inspected. Many buyers may also decide to close a deal based on if they feel an emotional connection to the house or not.
Fortunately, with an investor, things may look pretty different. An investor doesn't buy a house to live in it. Investing, repairing, and selling a house is their business thus there are no emotions involved in the process.
Investors may help you vacate
One of the most amazing feats of selling your home to an investor is the fact that some investors can even help you vacate the home before the final sale is done. Usually, people who opt to sell their homes to an investor are the ones in need of a sale as quickly as possible since they are not able to maintain their houses anymore or have different priorities. As most investors understand this, they are very open to helping the sellers out and providing them with solutions.
Investors can help you with shifting your personal belongings, get your home inspection done, make necessary repairs, and even get your house painted with a fresh coat of brand new paint. If you own furniture that you need to shift to a new place or things that need to be sold or donated, your investor might even help you with that as well.
Selling your home to an investor may not be a good idea for a majority of home sellers as the price they get for the property tends to be less than its market value of it. However, in certain situations, where there is a need for a quick sale, cash deals, or maybe a hassle-free selling process, selling to an investor might make the most sense. So, make sure to read up as much as you can about the process and trade with care to make the most out of the deal.