If you are thinking about selling your home, chances are you’ve started noticing the abundance of roadside signs that read, “We Buy Homes Fast!”. Or, perhaps, you’ve received a post card that says “We Pay Cash for Houses” or “We Want to Buy Your House” from a real estate investor who wants to buy your house. The real estate market has changed dramatically over the last decade. It has become common place fortypical home sellers to encounter cash investors who want to make them a “cash offer”. What used to be a “non-traditional” means to sell a house – for cash, as-is, without a real estate agent – has now become somewhat normal.
Depending on your particular situation, this change toward a new “normal” may be a very good thing! However, if you’re like most home sellers, you probably don’t have any direct experience in dealing with a cash investor or a professional homebuyer. So, as a professional homebuyer myself, I would like to help you better understand some of the pros and cons of selling directly to a real estate investor;
Pros of Selling to Real Estate Investors
Cash Offers – Quite often investors are willing to pay cash for a home which is the easiest way to sell a home, without a doubt. However, it may come with a price. I like to compare this process to trading in a car to a dealership, as opposed to selling to a private party. You will, most likely, get less money by trading your car into a dealer, however, you don’t have to deal with any of the inconveniences of selling to a private party. The experience is similar in selling your home to a cash investor. For example, a cash investor will not ask the home seller to make any repairs (called purchasing “as-is”) and will likely pay all of the closing costs. Additionally, by selling directly to a cash investor, the home seller does not have to deal with real estate agents, multiple showings of the home, uncertainty about the closing (home buyer’s ability to get approved for a loan, appraisal and inspections fees), etc. Given this, the option to selling to a cash buyer has become much more appealing over the years and may be the best option for you. It is quick and it is easy.
Selling “As Is” – As mentioned above, investors offer to purchase a property “as is,” many times sight unseen. As a seller, that allows you to avoid any costly repairs that would normally be considered the home seller’s responsibility. For example, if you were to sell your home on the open market, using a real estate agent or doing a “For Sale by Owner” (FSBO) you would, most likely, have to make repairs to the home prior to the close of escrow. Therefore, selling your home “as is” can be a very value added experience as banks and FHA lending institutions will not lend money on a home that is in disrepair. If you would like to compare the condition of a home you are wanting to sell to the FHA financing guidelines, you can visit this website: http://www.fhahandbook.com/appraisal-guidelines.php
Fast Closings – There are investors who can close within 5 to7 days! Because the sale of the property is not reliant on approved financing, appraised values, home inspections, or the like; bypassing all of these steps expedites the process considerably. The only thing required is the investor’s ability to wire the amount of money to the title/escrow company. In fact, most cash investors can close faster that most sellers can! The reason being is that, often times, it can take the home seller’s lending institution (or any other agencies who may have a lien against the property) longer to provide a title company the payoff information it needs to close, than it will for the home investor to wire funds.
Flexible Move Out Options – Unlike selling to a homeowner, Investors may offer various move out options such as a short, medium or long term lease back period. For example, this can be a very valuable option if a home seller is facing foreclosure, and needs to sell their house fast, but isn’t ready to move. Many cash home buyers will work out what is called a “lease back” option, which allows the home seller to stay in the home in order to make a smooth transition.
Cons When Selling to Real Estate Investors
Investors Do Not Need a License to Buy – NOT ALL CASH INVESTORS ARE CREATED EQUAL! This means that, as the seller, you research and learn about the person/entity offering to buy your home. Some investors highly qualified and well funded organizations, that have built a good and trustworthy reputation – while a lot of “cash investors” are merely people out to make a quick buck – they are not rated by the Better Business Bureau (BBB) don’t have the funding to make good on their offer and are only going to try and sell your contract to an able buyer (this process is called “assigning a deal”). These types of “investors” are cause for concern for many sellers because they tarnish the principles by which most reputable home buyers operate.
There are Plenty of Scam Artists Posing as Investors – There’s a risk of fraud in any financial transaction, but it’s especially critical to avoid scams when dealing with your largest asset. To avoid any issues, get the name of the investor and do research online to see who they are, ask for references and look them up with the Better Business Bureau. Any reputable business will have a rating with the BBB. If they don’t, then they are just lazy – which is never a good sign.
Homeowners Will Likely Sell Below Market Value – Investors have their own costs to contend with and you can be assured that those costs will be factored into their offered price. Investors are also aware of the power behind their cash offer and the fact that they are taking a risk by purchasing “as is.” They may be relying on your motivation to get out quickly. Whatever the reason, it is unlikely that an investor will pay market value for a home in its peak condition. Just like any other business and/or industry, the home investor needs to make a return on their investment. Otherwise, in all honesty, the professional home buying industry would not even exist.
Even though I have merely scratched the surface with respect to the differences between a cash home sale and a traditional home sale, I hope that you have found this information helpful. There are so many different aspects to the sale of real estate that it is very difficult to cover all of the questions one may have in one article.
As a successful real estate investor I think that it is important for you to know one guiding principle as it pertains to selling a house (or anything, for that matter) – It is your home, you are in control of theprocess. You don’t have to sell your home for any price that you don’t believe is fair nor should you sell to anybody you don’t trust.
So please, do your research and act wisely as this may be the biggest sale you ever make. Until next time, happy selling and god bless.
Your Friend at EliteHomeOffer.com