Selling a house to an investor may seem intimidating, but it is much easier and much cheaper than the traditional route of a real estate agent. If you are selling due to substantial repairs or emergency reasons, fill out the form below!
Selling a House to an Investor
Selling a house on the traditional real estate market is quite stressful to navigate. There's a lot of prep work and strategizing needed (i.e., repairs, staging, listing, etc.), which is made more complex when the property is facing issues such as liens or possible foreclosure. This is when selling to a real estate investor might make more sense.
Real estate investors or cash home buyers provide cash offers for any type of house. The selling process depends on what type of investor is purchasing the property— wholesale, buy-and-hold, flippers, or iBuyers. Typically, selling to a real estate investor is fast and hassle-free except when the issues on the property are impossible to fix.
To learn more about professional investors, their pros and cons, the selling process, and more, we made this comprehensive guide. If you don't know where to begin selling your house to an investor, this is a good place to start!
What is a Real Estate Investor?
Generally, a home investor is someone who invests capital in real estate or property. These home buyers have money management skills, and they are experts in evaluating the housing market so they can build wealth and plan their financial future.
Many home investors or cash home buyers usually put money into the four types of real estate: commercial, residential, industrial, and land. They buy properties below market prices and expect appreciation as time passes or after they make repairs or renovations.
Types of Real Estate Investors
To understand how selling to an investor works, we must first learn about the different types. The most common professional investors or cash home buyers that homeowners contact are buy-and-hold investors and house flippers. But iBuyers and wholesale investors also exist!
1. Wholesale Investors
Wholesale investors buy real estate below market price and sell it to another home investor at a much higher price. They don't make any improvements to the property before selling it.
2. Buy-and-hold Investors
Buy-and-hold home investors are exactly that. They buy houses and hold onto them for an extended period of time until the property appreciates. Some of these buy-and-hold investors purchase houses in order to make them rentals and profit in the long term.
Condos and single-family homes in economically booming areas are typically the targets of buy-and-hold investors so they can get more profit. They also prefer houses that need minimal to no repairs.
3. House Flippers
Flippers utilize the buy low, sell high investment strategy in real estate investing. Their target properties are those that need repairs or renovations, which the owner can't afford or has no interest in doing.
They have local contractor connections, so they do massive repairs and market the house on the local real estate market at a much higher price.
Note, however, that there are some flippers who are similar to wholesalers. They do minimal to no repairs and sell the fixer-upper to another home investor. This is called a micro-flipper.
iBuyers are the techie siblings of the home investors mentioned above. iBuying companies primarily work online; they use a software that analyzes home value through data that sellers input. They typically charge a convenience fee as part of their real estate investing business.
To date, iBuyers have massively contributed to the growth of cash offers in real estate.
Traditional Buyer vs. Real Estate Investor
Now that we've discussed the different types of real estate investors or cash home buyers, let us differentiate them from traditional buyers.
Traditional buyers usually purchase properties with the intent of living in them, so they are looking for move in ready homes. This is quite different from home investors who purchase real estate for profit.
Whatever a home investor does with the property—flipping, renting it out, or waiting for its value to appreciate—it's all to gain money.
Moreover, traditional buyers are usually found in the real estate market. These buyers hunt for houses to buy on the MLS and other listing platforms. Meanwhile, home investors or cash home buyers are direct buyers. Sellers usually approach them, instead of the other way around. They often have websites where the seller can fill out a form to get an offer.
Reasons to Sell to Investors
Many home sellers run to reputable investors when no one takes an interest in their house on the traditional market, the property has issues, or they just want a convenient real estate transaction. But aside from these, there are a lot more reasons why sellers prefer dealing with home investors. Check them out below:
Homeowners who are behind on payments on their mortgage loan and are at risk of foreclosure sell to investors to prevent their home from being sold in an auction.
People who have inherited a property from their relatives usually sell to home investors to avoid tending to the property, paying a mortgage (if it is still active), paying taxes, and making repairs.
Homeowners who need to relocate for work are given a very short timeline to move, so they end up paying two mortgages— one for the old house and another in the new city. To avoid the long waiting time for a traditional buyer and to deal with two mortgages, they sell to cash investors.
Couples who can't decide who will stay in the marital property after a divorce end up selling it. And since they don't want to deal with each other for long when finding a traditional buyer, they sell to real estate investors.
Tenants Occupying the Rental Property
Tenants, especially the terrible tenants, make the life of a landlord extremely stressful. Landlords who no longer want to deal with these tenants opt for home investors or cash home buyers when selling their rental property, as these buyers close fast.
Selling and Purchasing a Home at the Same Time
If the homeowner is already working on purchasing a new home, it might make more sense to sell to a home investor or cash buyer. This is to avoid paying two mortgages and property taxes as well as maintain two homes.
When the house has major damages, especially structural, it should be repaired before it can be listed on the traditional market. Repairs can easily cost thousands of dollars, so homeowners would rather ask for a cash offer instead of spending such a huge amount.
Home Financing isn't Possible
Houses that were hit by a typhoon or are already in bad shape because of age are not eligible for financing; that's why a traditional buyer would find it difficult to buy them. Since reputable investors buy houses as is and do the repairs themselves, they are the best option for these homeowners when selling.
Pros and Cons of Selling to a Real Estate Investor
As is with a traditional sale and working win an agent, selling a house to an investor also has its pros and cons. Let's examine all of these so you can decide whether this is the path for you.
Pros of Selling to a Real Estate Investor
There is little risk when you choose to sell quickly to a local investor or cash buyer. You typically don't have to worry that a sale will fall through since they have the funds to pay you in cash. True cash buyers in real estate investing do not depend on any creditor or mortgage lender to buy your property.
Fast Closing / Quick Sale
Investors or cash home buyers close on a house sale in as fast as seven days because they aren't waiting for any mortgage approval. Once you have agreed on their offer and there are no other issues on your property, such as clouded titles or liens, they can arrange for closing the soonest as you want. They will also cover closing costs.
Flexible Purchase Arrangements
Many investors offer flexible purchase agreements. For instance, if your house is in danger of foreclosure, but you don't want to sell and move out of it, reputable investors can buy it and rent it out to you. This setup, where the investor becomes your landlord, is called a sale-leaseback agreement.
As-is Sale / No Prep Work
Investors and cash home buyers, especially flippers and wholesalers, can buy a home as is, so you do not need to do any prep work, including repairs, renovations, etc. This can save you a lot of money and energy. Usually, investors do all the work needed so they can sell your house or rent it out at a much higher price.
All Cash Offer / No Delays in Financing
As previously mentioned, most investors do not need the help of a financing company to buy your property. They give all cash offers, so there would be no delays in the purchase of your home. Delays in financing are very common in traditional sales since mortgage lenders take time to do assessments and inspections before approval.
A traditional buyer usually decides the closing date of a home sale. Meanwhile, in real estate investing, home sellers are allowed to set a closing date that is within reason.
If you are selling your house and want to close in two weeks or just right before you move to a new house, it is totally fine. You just have to communicate it to the home buying company or cash buyer, so they can schedule it properly.
Simple Real Estate Transaction
What makes traditional home sales complicated is the involvement of mortgage lenders. Since investors or cash home buyers remove these financers from the picture, the sale becomes a lot faster and less complex. The seller simply asks for an offer, signs a contract, and closes the sale.
Additionally, a professional investor has a local title company connection, so the transfer of the deed is a lot faster.
You don't need a licensed real estate agent or broker when dealing with a local investor since your house would be bought directly from you. This means that paying real estate commissions on top of the closing costs, property taxes, etc., won't be a burden to you, unlike in a traditional sale.
Cons of Selling to an Investor
Possible Lower Offer
You cannot expect an investor or cash buyer to purchase your house at a very competitive price, especially if they're buying it as-is. Often, the offer in investor sales is below market value since they would still have to shoulder the cost of repairs or rebuilding and closing costs.
Little to No Background of the Investor
You cannot require an investor to disclose their background before you sell your house to them. In other words, you won't really know whether they are a developer, micro-flipper, or a shady businessman who plans to take advantage of you.
Nevertheless, you can do a simple background check on your own— check their website and the reviews of their previous clients to see if they can be trusted.
Some scammers pose as real estate investors in order to swindle money from innocent home sellers. This is common in any business, so you have to be cautious in choosing who you deal with. Try connecting to homeowners who previously sold their homes to the investor to see if they're really legitimate.
Foreign Investors Take Time to Close
If your investor isn't in the United States, the purchase agreement could be delayed for a few months since they need to figure out the logistics of closing. Usually, foreign investors suffer from tax consequences when they buy properties out of their home country. If you need to sell your home ASAP, this isn't possible with a foreign home investor.
Should I Sell My House to an Investor?
Before you go contact a real estate investor you found online, there are a few questions you have to ask yourself to ensure that selling your home to one is the right decision.
1. How Urgently Do You Need to Make a Home Sale?
If you are not in a rush to sell your property, you might want to find home buyers traditionally to get offers near your home's fair market value. Meanwhile, if you need to sell fast because you have to relocate, your house is being foreclosed, you're getting a divorce, etc., it makes sense to opt for an investor sale to close fast.
2. What is the Current State of Your Property?
Properties that are damaged and need structural repairs are too complicated to market. They are better sold as-is to flippers and investors.
If your house is in good condition and only needs a new backsplash or lighting, you may want to sell traditionally. However, if you want to sell a perfectly good home fast, you can always sell to iBuyers and buy-and-hold investors.
3. Do You Have a Budget for Repairs and Staging?
When selling your house on the local market, you have to make repairs and stage it so buyers would take an interest. These updates and upgrades included in the sales process aren't cheap and could easily amount to thousands of dollars.
If you do not have the budget for this, investors are your best option since they won't ask you to improve anything before making the purchase.
4. Does Selling to an Investor Fit Your Moving Plan?
Selling to an investor can liquify your assets faster. That said, if you need money for the downpayment of a new house, this is your best option. Moreover, getting a fair cash offer is also suggested if you are moving to a new city due to employment. To avoid paying two mortgages at once, you can get rid of your property fast when you sell to an investor.
5. Will You be Present Throughout the Sale Process?
People who have inherited a property but are living in another state won't be able to be active in selling a house on the local market. It makes more sense to sell to an investor and let them handle everything around the house instead of traveling overseas and personally handling repairs, staging, and listing the property.
The Process of Selling Your Home to an Investor
The process of selling your home to an investor depends on the type of investor you are dealing with. Although generally, you need to ask them for an offer, sign a contract, and close, there are some differences in how each investor deals with an average home seller.
Selling to a wholesale investor isn't that complicated. Usually, they would ask you to sign a wholesale contract that gives them the right to sell your property to another investor for a certain period of time.
In other words, you won't have to transfer the title of your property to them.
Once you sign the contract, they need to find an end buyer. The goal of the wholesale investor is to sell your property at a higher purchase price so they'll gain profit or get a "finders fee" after the sale closes.
If, in case, you do not agree on the assignment of a contract or the state laws prohibit this type of buying a house, a double escrow or double close may occur.
The wholesale investor purchases the property and becomes its title owner until he chooses to sell it to another investor for a higher price.
Buying the house from you and selling it to another investor can happen in a day, so it is tagged as a double close.
The target of many buy-and-hold investors are rental properties since they plan to yield short-term gains as well as long-term appreciation.
To sell your house to a buy-and-hold investor, contact them to ask for an offer. They'll gladly give you one even though your house is occupied by tenants. In fact, many buy-and-hold investors prefer this since it can save them time in finding new renters.
Once you accept their offer and sign the contract, the sale will reach the closing process and you'll get your money in your bank.
House flippers work just like most investors; however, their offer may be a bit lower since they shoulder the repairs and renovations of a property.
To sell your house to a flipper or cash home buyer, you can visit their website and fill out a form or you can give them a call. Most probably, they will ask to visit your fixer-upper to check how much work it needs. This will help them formulate an accurate offer.
If you accept their offer, they'll send you a contract electronically. They'll give you time to review the contract and sign it. After which, the sale would proceed to the closing process.
Selling to a flipper ensures a fast and hassle free sale.
To sell your property to an iBuyer, you have to visit their website, input details about your home, and request an offer. Depending on the cash buying company, they may send you an offer within 48 hours or less.
Their offer is based on the software they are using to assess a home. But aside from this, they'll also schedule an in-person assessment so they can list all the repairs needed by your house. They'll deduct the cost of the repairs from their initial offer.
After the issues on repairs are sorted, you can choose your closing date. Note that you may be asked for closing fees and other out of pocket costs for an iBuyer.
Do Investors Buy Houses Below Market Value?
In most cases, yes, investors buy houses below full market value or asking price since it is a business venture for them. But how much less they're going to pay mainly depends on three things— the type of investor, the property's location, and the property's current state.
For example, a home flipper may buy your house at a bargain asking price because they have to discount the expenses of renovations and repairs. They also have to ensure that they get something out of rehabilitating the property.
Typically, flippers follow the 70% rule, which means they would only pay you 70% of the ARV of the After Repair Value of your property.
Meanwhile, buy-and-hold investors may buy your property close to its fair market value since they expect profit through appreciation or rent. They don't plan to sell your property right away, but they intend to make an income out of it.
iBuyers also pay close to a home's fair market value. However, they prefer houses that need little to no repairs.
Are There Any Fees When Selling to an Investor?
Usually, investors don't charge any fees. They cover closing costs and other fees associated with the home sale, so you can get the exact amount of their offer. However, it is a different story if you hired a licensed real estate agent to help you in the transaction.
For just the seller's real estate agent, you will be charged a 2.5% to 3% commission fee at closing. You are required to pay them for their service, which defeats the purpose of working with an investor.
How to Choose the Right Investor?
The fact that there are so many real estate investors that are advertising on the web is a bit scary. It is hard to identify which ones are legitimate and which are scammers.
To help you find a reputable investor, check out the following tips!
Research Your Options
Don't settle on the first investor you find online. Do extensive research on all the investors in your area or even out of state investors who are interested in the properties in your community.
Once you have a list, verify the legitimate ones and compare their backgrounds.
Check Reviews Online
One of the best ways to check if an investor is reputable is by checking positive online reviews.
You can search for reviews on Google and other trustworthy business review sites such as the Better Business Bureau to see if they have successfully bought houses before. This will also help you weed out investors who are difficult to deal with or those who make super low offers.
Check if They are Accredited
Generally, investors that are accredited by industry experts are to be trusted. After all, they won't pass the stringent accreditation process if they are fraudulent.
Verify Their Experience
It is possible that the claims made on the investor's website aren't true. Hence, you have to verify if they are really experienced in buying real estate. Local real estate agents and title companies usually know of the top investors in the area. So, chat with some real estate experts to verify the investor's credibility.
Learn About Their Fund Sources
Another thing you can do is to ask the investors upfront regarding their fund sources. If they are home flippers, they're probably paying you a portion of the profit from their last sale. If they are buy-and-hold investors, they have enough money to pay you with cash since they probably have other properties where they are profiting.
Investors who are not keen to disclose their source of funds could be scammers.
Consider How Fair Their Cash Offer Is
Although you can expect cash offers from investors to be comparatively lower than the market value of your property, it should not be too low that you would get nothing from the sale.
If they're trying to lowball you for a house that only needs minimal repairs, don't take their offer and find another investor that can give you a fair price.
Related Questions to Real Estate Investors
Do Investors Buy Houses in Foreclosure?
Yes. Selling your house to an investor when it is about to be foreclosed is possible. They are the best option when a house is facing foreclosure since they close fast. In other words, even if it's only less than a month before the house is sold in an auction, they can make a sale possible.
Do Investors Buy Houses with a Lien?
Yes. Investors buy houses even if a lien is discovered in closing. However, the amount of the lien is crucial. If what the homeowner owes is more than what the investor offered for the house, the latter would not be able to offer more. In short, the seller will walk away with net negative proceeds when the lien exceeds the cash offer.
Do Investors Require Inspection?
In most cases, no. Investors do not require an inspection, but they do a walkthrough. They assess the repairs and improvements needed by your property. This helps them set an accurate offer. If you find an investor that doesn't do a walkthrough, chances are, they'll give you a very high offer and then come back to renegotiate after you signed the contract.
Do Investors Buy Rental Properties with Tenants?
Yes. Selling your house with tenants is possible with an investor. This is most common for buy-and-hold investors since they don't plan to sell the property right away. Buying a property with tenants saves them the time to find new ones. However, if the tenant is a headache, they may back out of the sale or request you to get rid of the terrible tenant first.
What are the Biggest Mistakes of Homeowners when Selling to a Real Estate Investor?
The biggest mistakes homeowners commit when selling to an investor are settling on the first cash offer they receive and not verifying the credibility of the investor.
Settling on the first investor they come across lets them miss possible higher offers. Meanwhile, not verifying the background or experience of the investor can get a homeowner scammed.
Do You Need a Real Estate Agent When Working with Investors?
No. You don't need real estate agents when selling your home to an investor since there is no staging, marketing, or listing needed. You can ask for an offer directly by contacting the investor and handling the paperwork on your own since it isn't that much compared to a traditional home sale.
Nevertheless, if you live in a different state or are too busy to process a home sale with an investor, a real estate agent can be your representative.
Do Investors Back Out of Buying a House?
Investors don't commonly back out of a home sale once they've put in an offer since they have enough funds to pay in cash. However, if they find that the seller is fraudulent or there are too many issues with the property and it would cost them a huge amount of money to settle it, they can still back out.
Final Thoughts: Sell a Home to an Investor
Selling a house to an investor is advantageous, especially if you own a house with a lot of issues or you have limited time to sell. They give offers fast and allow you to set a closing date, so the sale timeline aligns with your moving plans.
If you don't know where to start finding an investor in your area or are afraid of being scammed, reach out to us at Sell My House Fast.
We have a solid track record in buying houses, and we make sure that our offers consider the fair market value of your property.
To start working with us, fill out our form below or call us at (844) 207-0788.