Working with investors to help sell your home. What they can do for you!
There is no doubt that there are different ways of selling a house, but all of them are not the most convenient options all the time. It entirely depends on the situation and your requirements as to which option will be the best fit for you.
Real estate investors are a different breed of a client with a whole set of unusual demands and needs. They assess the real estate market and purchases property with the intention of earning a profitable financial return. Just like people purchasing bonds and stocks, investors take the financial risk to gain a profit.
There are also different types of investors as mentioned earlier. Here are some of the properties real estate investors will be after:
- foreclosures
- owner-occupied pre-foreclosures
- sellers whose listings expire or sellers who can’t sell
- sellers who are divorcing
- bankruptcies
- homes in probate
- homes in foreclosure
- sellers whose employers transfer them
- owners who are evicting tenants
- vacant homes
- trashed or damaged homes
- owner-occupied by distressed sellers
- abandoned pre-foreclosures
- government auctioned foreclosures
Foreclosures are easy to find through foreclosure websites and other sources that publish foreclosure property lists. Owner-occupied properties normally require marketing such as bandit signs, newspaper classifieds, Craigslist ads., social sites marketing, etc.
Here are some of the reasons why you need to consider working real estate investors to sell your house. These are the benefits of selling to a real estate investor compared to going through the “traditional” real estate agent process:
Fast closings
Have you ever found yourself in a situation where you want to sell your house fast but you cannot? Well, that is a situation where many people find themselves. You may try to clear the gutters and do anything at your disposal to ensure that the house is attractive to anyone who cares to take note. The secret is that you should find the right buyers, like real estate investors, who are ready to seal the deal fast. The real estate investors are professionals who have a lot of experience in helping people to sell their homes fast. There is nothing bad like when you want to sell your house fast, but you cannot find the right buyer to help you realize it.
None of the other options is better when you are trying to sell your house fast. It is because of this reason that when you contact an investor you get offers within a period of 24 hours, which is not possible when you sell your house to a realtor. Cash home buyers make offers daily. It takes investors just a few minutes to put together an offer.
After you contact an investor or an investment company, they will come to your house, examine its condition and then will present the offer on the spot. There is no need to wait for days for the offers.
Since investors control their cash reserves, once there is a price agreement, all it takes is the time for a wire transfer to your bank account. Professional buyers also close quick because there is no negotiation about the condition on “as is” sales. Fast closing saves you on-going expenses for taxes, insurance, daily maintenance, and utilities. Being able to skip all of these steps hurries up the process. They regularly close in less than a month!
Fast cash availability
Another good thing about selling your house to real estate investors is that they buy your house in cash not mortgages. There is no need to wait for bank financing or any other such issue as the reliable investors have the cash-in-hand to provide it to you when required. Mortgages take months for approval and banks may decline mortgages on homes in poor condition or an event to disqualify the buyer such as job loss or bankruptcy.
One good thing with real estate investors is that they take the time to know some of the reasons why you want to sell your house. Once they know the reasons behind your selling, they will work towards ensuring that they meet them or exceed them. They are professional buyers who want to ensure that their clients are satisfied so that their reputation is well guided. This is why you will never have problems when selling your house if you sell it to the right people.
Yes, an investor takes a discount on the selling price since they are covering the repairs instead of you, but this is a small price to pay to sell quickly and easily.
Flexible Payment Options
Investors may offer various payment methods such as certified funds, cash, pre-scheduled cash payments, or perhaps they may even take over the existing mortgage completely. With various options available, sellers are more likely to find a solution that suits their needs.
No Guessing
When you sell to a buyer through traditional retail channels, you’re guessing and hoping that they’ll pay you your full asking price. Often you’ll wait several months for someone to make an offer and then they want to negotiate a lower price. When you sell to an investor, you know right away exactly what the real estate investment company will pay. You don’t have to accept their offer, but it’s a great first step to help you decide how to move forward.
No need to move before you sell
Unlike with a realtor agent, you can negotiate so that you do not have to move out of your home before you sell it. The house does not need to be “show ready” for months on end while waiting for a buyer. When you do find a buyer, you also don’t have to be out of the house until you sign the dotted line. Even then, you can almost always negotiate a lease-back agreement with your buyer, meaning you can have the equity you need out of your home before you move out.
No extra costs
Selling listings on the MLS pay commission for the realtor. Real estate investors never charge fees. Selling your house to real estate investors means that you will never have to pay anything out of your pocket to aid the selling process. After examining your house’s condition, the investor will offer you the price that he would be interested in paying at the time of closing. So, there are no hidden charges or any other cost. It is them who work hard to ensure that your house is sold fast and without having to make you pay for anything.
With the increased cost of living, you need to be interested as there are people who claim to be real estate agents when all they are after is disappearing with your money.
No need to make repairs
When it comes to real estate investors, the condition of the house does not matter. Unlike in the case of selling your home through a realtor or directly to a buyer, investors buy homes “as is” in order to “earn their profit” by flipping them. As a seller, that allows you to avoid any costly repairs that would normally be considered your responsibility. So if you know you do not have time to do repairs or cannot afford to repair or stage your house yourself, then these are the people that you should go for.
One Showing/Inspection
Realtors listing on the open market schedule many showings to generate as many offers as possible. Hundreds of people might walk through your living space. Open houses attract “tire kickers” with no plans to submit an offer. Trulia reports one out of 10 showings gets an offer. Investors just need a single walkthrough to inspect and even buy sight unseen. Professional buyers offer on all kinds of a property so are unlikely to decline to make an offer.
Best way to avoid foreclosure
If you’re behind on your mortgage payments and your lender is threatening to foreclose on your property, you’re in a stressful situation. Sometimes it is possible to negotiate more favorable loan terms with your lender in hopes this will ease the financial burden and you’ll be able to keep the house. A loan modification may not be approved, however, and by the time your lender makes this decision, you’ll be even further behind on your mortgage, which in turn increases your risk of foreclosure.
Due to the fast-selling process, selling your house to an investor is the only way to avoid foreclosures, many a time. As selling through a realtor or a traditional agent will take more than a month, it will not avoid the foreclosure.
Whatever the case, there are some important things you should know about the process to ensure you get a fair deal that is mutually beneficial.
Contact a Real Estate Agent
Speak with a qualified real estate agent who deals with investors on a regular basis. An experienced real estate agent can advise you what to expect during the sales process, help you appraise your home for the current market conditions and might even be able to set you up with a local investor. Some real estate agents work with investors and real estate flippers who might have an interest in purchasing your home, remodeling it and selling it for profit. Real estate agents often receive requests for leads on investment properties, and working with an agent could put you in touch with the right buyer.
Determine Interest
Contact property investment companies in your area and query whether there is any interest in your home. If you know your property is located in a prime area, you might attract the attention of real estate developers interested in rebuilding on your property. Real estate developers are typically listed in the yellow pages, or you can find local developers in Las Vegas by entering keywords such as “real estate developer las vegas” into a browser search.
Search for Investors
Find real estate investors in your area by searching local real estate investing clubs, such as Bigger Pockets. These type of online networking sites make it easy to find investors in your area. Companies and individuals might advertise with signage, newspapers and local television ads that they buy houses.
Make It Legal
Seek the counsel of a real estate attorney to assist you in forming a contract for your sale. Some investors are more interested in getting the best price than watching out for your welfare. If you are selling to an investor because of financial difficulties or approaching foreclosure, this is especially important. Additionally, if you are hoping to rent or buy back your home from an investor, it is essential that the terms of such an arrangement are carefully spelled out in a legal agreement.
If you sign an investor’s contract without the guidance of an attorney working on your behalf, you could accidentally sign away your rights to your home.
What’s it like to work with investors?
Here are the steps an investor takes to evaluate what they are willing to pay for your home:
Step 1. Get under contract. The first thing an investor is going to try to do is to get under contract with you. They don’t even care about the price or the house yet – they just want to make sure nobody else can buy it until they’ve had time to review the deal themselves. Investors will have an option period where they can walk away for any reason whatsoever, often a few weeks or even months. During this time they will inspect the home, estimate repairs, and VERY likely renegotiate the price completely. It is typical that they will get you under contract for a too-good-to-be-true price and then come down a LOT after their inspection. We recommend that you make the option period as short as possible so that you are not stuck with an investor for too long. Reputable investors and wholesalers can do their due diligence and line up a buyer (if they aren’t buying it themselves) in a week. Try to get an option period of 7 or 10 days.
Step 2. Get an ARV. An investor will work with a Realtor to determine a fair, after-repair-value (ARV) for your home. This price is what your home could be sold for if it were completely fixed up, including remodeled and renovated if necessary. This is the price they will usually try to sell your home for after they’ve repaired and fixed it up. They don’t have to share this price with you. If you want to know what their ARV is, you need to consult your own Realtor, which we highly recommend doing.
Step 3. Estimate costs. They are going to inspect your home and come up with estimated repair costs. Most investors will not hire a licensed inspector but instead ask their contractor to come by and provide an estimate, or perhaps even just the investor themselves will come up with the number.
Step 4. Multiply the ARV by 70%. This is called the 70% Rule for house flippers. Investors want 30% of the ARV to cover their holding costs, Realtor commissions, and transaction costs. That is not the whole 30%, though – the rest is the profit. The 30% also serves as a buffer in case they under-estimated the repair costs (which actually happens most of the time), or over-estimated the ARV. Las Vegas area flippers may even look for more than 30% because transaction costs tend to be a big number.
Step 5. Subtract all costs. After multiplying the ARV by 0.7, the investor will subtract the estimated cost of repairs.
Step 6. Make the offer. If you do the math, it is a “low ball” number, but don’t be offended. That is just investor math. Investors are usually up for negotiation, but the good ones simply make an offer and, if your answer is no, move on to the next deal. It is a numbers game and not about forcing a deal.
And unfortunately no, selling your $125,000 home for $115,000 is not a great “investor deal”. If that is the kind of discount you are willing to take to move your home a little faster, then you are still better off listing with an agent instead of selling to an investor.
Here’s an example to help understand the difference:
Your home, completely fixed up, is worth $150,000 (the ARV). $150,000 x 70% = $105,000. They estimate $15,000 in repairs. $90,000 would be an investor’s offer. That is a whole $60,000 off the fixed-up market value of your home. If that number insults you, then you should consider listing your home with a Realtor, but if, because of your situation, you are ok with that, then nothing will be as quick and painless as a cash investor deal.
Should I Sell My House To An Investor?
There are many ways to sell your house. Selling to an investor isn’t the right choice for everyone, but it might be right for you. Knowing when you should sell your house to an investor is key to making the best decision. Sometimes selling to an investor may net you less money from the sale, other times it’s the best possible decision to make. Now that we’ve gone through the important details, let take a quick look at how to deal with investors as well as negotiating with cash house buyers, should you choose to work with them. Here are a few tips:
- Let an investor know you understand that they need to make a profit, but you anticipate a fair deal for both parties. Let them know upfront you know what your house is worth.
- Inquire the house buyer for references.
- If they provide an offer, ask them how they came up with that figure. Transparency is important.
- Ask them what they plan on doing with the property after they buy.
In summary
Many home sellers go through long processes of fixing up their home just to get it in selling condition. If a buyer is going to pay money for a house, they expect it to be in the best condition possible. This includes inside, outside, the roof and landscaping just to name a few things. This takes time and is expensive. Why would you want to spend time making a home nice that you aren’t even going to live in? Investors buy a house as-is, making things as convenient as possible.
Working with reputable real estate investors makes sense in many situations, particularly when selling a house can cost even more money with every day that passes. Many homeowners have realized the value of selling their house without spending money on repairs, renovations, fees or paying for two mortgages. That’s when making the choice to sell for cash can be a homeowner’s best option and investment buyers can become a home seller’s best friend.