Selling a home takes just as much time and effort as buying one. Many homeowners have had their homes listed on a real estate website for months and are yet to sell them. The market is unforgiving and difficult to navigate. For homeowners struggling to sell their homes in the market, selling to real estate investors is a viable alternative.
There are a lot of benefits to selling your home to a real estate investor. However, there is also a flip side to this. In this post, you will get a clear idea of the pros and cons of selling your house to an investor.
Who are real estate investors?
In the simplest terms, a real estate investor is nothing but a real estate buyer who buys in bulk. Most investors will buy houses and will pay cash to the homeowners.
These investors are regularly buying and selling houses. Sometimes they sell it to buyers and, other times, to another investor. They do it with the sole purpose of earning profit.
There are three things investors will do with the property they buy.
House flipping
Investors are ready to buy any houses. Even if your home is not in great condition, they will still buy it. After buying ugly houses, they give them a nice makeover, make them pretty and live-able, and sell them at a profit.
Rental properties
Some investors will rent out their property and become landlords. There are two things one can do here. First, become the landlord and manage the mortgage payments and other things. Second, become a part of real estate investment groups. If the investor is too busy buying and selling homes, they can delegate mortgage collection and other landlord responsibilities to investor groups.
Sell at a higher price
This is the most basic job of an investor- buying properties at a cheaper rate when the market value has fallen and then selling them at a higher price at the right time to get the most profit.
Investors and Realtors are not the same
Many people get confused between real estate investors and real estate agents/ realtors, especially first-time buyers and sellers. Realtors are members of the National Association of Realtors and have valid licenses. They know both buyer’s and sellers’ markets and help sellers meet the perfect buyer and vice versa. When a deal happens, they take a small percentage as their earnings to make their money. Realtors or real estate agents are not real estate investors.
Pros and Cons
Now that you have a clear idea of what a real estate investor does, let’s cut to the chase and discuss the pros and cons. Once you know the benefits and drawbacks, it will become easier for you to decide if you should consider home investors for selling your house or not.
Pros
Selling a home to investors seems like a thing only a few people do, but that is not the case. Many Spokane home buyers and sellers are signing deals with investors for the following perks.
As-is Sale
The biggest advantage for home sellers selling their house to an investor is that the home can be sold as-is. Your house may be old. It may also need some major and minor repairs.
You can still sell it.
If you try a traditional home sale, you will have to fix your house and make it look pretty to get a deal faster. This is because nobody wants to buy an ugly house ridden with expensive issues.
With an investor, things are different. Many real estate investors buy houses that need renovation and repair because they get them cheaply. If you want to sell your home quickly, and don’t have the time or the money required for repairs and renovations, an investor is an ideal buyer for you.
Multiple payment options
An investor is usually a cash buyer. An all-cash investor will buy your house and pay you in cash. However, if you don’t prefer cash, there are many other payment options they can offer you. For example, scheduled cash payments, pre-scheduled cash payments, and certified funds. An investor can give you flexible purchase arrangements so you can choose what suits you the best. For example, if you need cash to pay your mortgage, you can go for an all-cash offer.
Saves your time
Selling to an investor is a cakewalk. They are always ready to buy houses. Let’s assume you are selling your house with a real estate agent; here’s what the process would probably look like:
They will list your house, but before that, you have to make your house ready for a photoshoot, do all major repairs, and conduct a home inspection.
Once your house is listed, you will have to entertain a bunch of buyers. After some weeks or sometimes months, you may find a good buyer, but the deal may still fall through at this point. If that happens, you will have to list the house again and repeat this process all over again after waiting for some time.
Selling your house to a traditional buyer will take time, money, and effort. Selling to an investor, on the other hand, is rather easy. They’ll check your property, and they wouldn’t mind if your house is not photoshoot worthy. If they sense profit in your property, they will buy it anyway. You sign some documents, you get your cash, and you are done. That’s it. So quick and so simple.
If that was too wordy for you to understand, let me make it simple. With a real estate agent, it will easily take a couple of months, and if you are not lucky, then many months, to seal a deal. On the other hand, a contract with an investor usually happens within a week.
Avoid extra expenses
You have to deal with many extra expenses when selling your house through an agent.
Inspection
Many buyers now don’t consider a property if it doesn’t come with a legitimate inspection report. Home inspectors make a detailed report about the house, and it includes all the major and minor repairs that need to be done. It is helpful for buyers to negotiate a lower price and to make sure they are investing their money in the right property. Home inspectors will charge you their respective fees.
Repairing and renovating
Once your inspection is done, you may also need to pay for conducting remodeling projects, repairing damages, and landscaping.
Closing costs
Closing expenses are fees that must be paid apart from the purchase price of the house at the time of closing.
Documentation
There is a long list of documents that you have to sign while closing the deal. All this will add to the excess cost that you will have to pay.
Commission
Finally, there is the real estate agent’s commission. The agent will take a small percentage of the money from the deal.
You can avoid all these extra expenses by selling your house to an investor. You don’t need to carry out an inspection, renovation, repair, or documentation, and they don’t take any commission fees.
Sell even when the market is down
The market value keeps fluctuating. When the market is down, selling the house becomes difficult. But that is not the case with an investor. Investors will buy your home irrespective of the status of the real estate market in your area. They will wait for the ideal moment when the market value of your house is higher, and then they will sell it immediately for a higher price than they bought it for. In this way, both you and the investor benefit.
Cons
The cons of selling your home to an investor are fewer, but it is important to know them to make an informed decision.
You don’t get the fair market value
Fair market value is the price of your house according to the real estate market rates at that moment. Most investors will not buy the house at fair market value. It is not like they will pay you less on purpose. If you try to sell the house in a traditional sale, the condition of your home, the landscaping, and major and minor repairs will be major factors that will help the conventional buyer to negotiate for cost.
As mentioned earlier, investors will buy houses that are not in good shape and that require costly repairs as well. If such a house is simply put on the market, either your house will never be sold, or you will have to sell it at a reduced price due to the flaws in your property.
So because of the condition of your house and also because they are paying in cash, a real estate investor will buy your home at a lower price than the market value.
Real estate investor scams
Wherever you go around the world, you will find crafty scammers trying to take advantage of less aware people, as they are easy to fool.
They will claim to be foreign investors and give you a false cashier’s check and false documents with a wrong sign. Many home sellers are in need of some quick cash and end up putting their foot in this trap.
It is not easy to avoid scams in real estate. Do as much research online as you can and ask your investor about their previous work. Get as much information as you can before closing the deal. You can make use of Better Business Bureau (BBB) to know if you can trust the business you are dealing with.
Investors are not licensed
Unlike real estate agents, investors are not licensed. They do not require one. From a broader perspective, investors are nothing but buyers. Do buyers need a license?
However, since there is no governing body, you have to be more careful. It is quite possible that they are in touch with you using a fake identity and are actually a part of some fishy organization.
Should I sell my home to an investor or not?
With the pros and cons in front of you, coming to a conclusion is difficult. Let us help you with that. Whether you should sell your house to an investor or not will depend on what you are selling your house for. If you are in need of some quick cash, you should certainly consider an investor. The selling process is quick, and you get the money when you need it the most.
But on the other hand, you may not get the fair market value of your property. If getting the highest deal is your objective, then probably hiring a real estate agent would prove to be the best. They can hunt down potential buyers quickly.
In a nutshell, the choice to be made is whether you want a quick sale or the highest price for your house.
I hope you are able to make a decision now. While you are still thinking about it, here is a quick recap to give you a brief overview of today’s post.
Recap
- Selling a house is a stressful process. It is difficult to find the ideal buyer and close the deal.
- With an investor, you can sell quickly. Investors are businesses that buy houses and sell them regularly.
- Many investors buy ugly houses and remodel them to sell them at a higher price.
- There are many benefits and drawbacks to selling your home to an investor.
Pros
- As-is Sale
- Multiple payment options
- Saves your time
- Avoid extra expenses
- Sell even when the market is low
Cons
- You don’t get the fair market value
- Real estate investor scams
- Investors are not licensed
Conclusion
Whether you should sell to an investor or not will depend on what you want from the sale. If you want quick cash, find an investor, but if you are looking for more money, then a real estate person would be the ideal choice.
