Did you know that, according to CNBC, there were 1.28 million homes for sale in the US in November 2020—with the median price of homes sold being $310,800? Many Americans are selling their homes this year, and at prices that are worth it for them.
If you’re planning on selling your home, then you might be looking into companies that buy houses. Sure, it isn’t the most normal way of selling your home, but it saves you time. You might have questions if you’re considering selling your home to one of the companies that buy houses. You might be asking yourself:
“What do I need to know about companies that buy your house?”
“What are the pros and cons of selling my home to one of these companies?”
“How does the process of selling to these companies work?”
Having so many questions can be confusing. If you’re in a rush to sell your home, it can also be frustrating. That’s why we’ve put together this guide. By giving you the information you need about companies that buy houses, you can decide if this is the way to go for you. Read on to learn more.
What Is a House Buying Company?
When it comes to knowing if selling to companies that will buy your house is the right choice for you, you need to understand what house buying companies are. Basically, these companies (as might seem obvious) focus on buying homes from home sellers.
The added benefit for you is that these are companies that buy houses for cash. Therefore, the sales process is much shorter than when you’re involving a bank in the transaction like with a usual realtor-managed or FSBO home sale. There’s also the added plus of getting cash in hand.
There are different types of house buying companies. These include buy-and-hold companies, house flippers, iBuyers, and trade-in companies. Let’s review each of these in detail.
A buy-and-hold company buys your home so that they can then rent it out to tenants. Some of these are large corporations, while others are smaller landlord businesses. Usually, these types of companies will use the BRRR model when buying and then renting out homes.
BRRR stands for Buy, Rehabilitate, Refinance, and then Repeat. If your home needs quite a lot of work but has good bones, this won’t be a problem for these companies, since they’re happy to do a bit of work on your home before renting it out.
House flippers are another type of company that buys houses. When these companies buy homes, they buy them fast, fix them up as needed, and then sell them again to make a profit. These changes might be anything from aesthetic to structural changes.
Usually, these businesses make a profit between 15% to 20% higher than the price they bought your home at.
iBuyers are online businesses that do research about the real estate market so that they can make quick offers on houses. They’re a lot like house flippers, except they’re not interested in fixing up homes as much. Instead, they focus on homes that will be relatively easy to sell once they’ve purchased them.
Additionally, they work differently in that they’ll buy your home at closer to market value than these other companies, after which they’ll charge you a fee of between 6% to 7% of your home’s value. This fee covers their efforts to market, sell, and manage the purchase of the home.
iBuyers are found in cities, as well as in rural and suburban areas. To learn more about iBuyers, you can visit iBuyer.com. Using this website will help you get an offer for your house no matter where you are, whether your home is in a city or a more rural or suburban area.
Trade-in companies are quite different than the rest of these listed since they will get you another home, at times using your home as collateral. They might also allow you to continue living in your home until they’ve managed to sell it.
If you want to have a guaranteed place to live, then a trade-in company is the right type of company to sell your home to.
How These Companies Work
There are several steps you take when selling your home to companies that buy houses. The process starts out with you (or your listing agent) getting in touch with one of these companies and ends with choosing a closing date. The steps, in order, are:
- Getting in touch with companies you think are the right fit for you
- The company will get the information they need about your property
- The company will come to do a survey of your home, taking note of any needed repairs and its general condition
- The company will decide on what the after-repair value of your home is (also known as ARV) after calculating the value of your home as well as the cost of needed repairs
- The company will make you an offer, which will include the closing date, the amount proposed, and any other details related to the sale
- You’ll reach the closing date, which is when the house will be sold
As you can see, it’s a pretty straightforward process. If you’re looking for speed and simplicity, selling your house to one of these companies is a good choice for how to sell your house. Now that we’ve reviewed the process, we’ll move on to…
What Sellers Do They Target?
When it comes to sellers these companies target, they’re looking for home sellers who are ready to sell their home fast and at a price that they find reasonable. Additionally, they’re going to buy your home not because their heart is set on it, but because they see it as a financial opportunity.
Therefore, these companies won’t be interested in a home that has a lot of “character” or needs substantial repairs. Put yourself in their shoes and ask yourself if your home is one that can be resold easily.
Pros of a Direct Home Buyer
There are many pros of selling your home to a home buying company. From being able to sell your home “as is” without having to worry about too many small repairs to having flexible move-out dates, there are some pretty big pros. Let’s review them now.
You Can Sell Your Home “As Is”
When you’re selling your home without one of these companies—whether you’re selling it yourself or with the assistance of a realtor—any buyer will expect you to make fixes big and small to your home. If you don’t, this may delay the sale or make it impossible entirely.
When you sell your home to a direct home buyer, they’re happy to do many repairs themselves. You can sell your home and they can deal with those issues themselves.
It’s a Fast Sale
While selling traditionally can take months, selling your home to a direct home buyer can take less than a month. Sometimes, it might take only seven days. If you want to sell your home fast, this is the way to go. Additionally, they’re likely to cover the closing costs, which can be a headache when selling your home traditionally.
You Don’t Need to Do Much Prep
When selling your home traditionally, you need to clean your home so that it glistens. You need to get rid of clutter. It needs to look good for the pictures you take for your ad, and it even needs to smell like cookies when you host an open house.
When you’re selling your home to a company that buys houses, you don’t need to do any of this. They’ll come in to look at your home and see its potential through a financial lens. Sure, you might clean a little, but it’s way less work for you overall.
There Are Few Inspection Contingencies
Traditional home buyers will have an inspector come in to see if there are any issues with your home. If they aren’t fixed, then they’ll hold up the sale until you’ve dealt with these contingencies. A home-buying company is far less likely to make a big fuss about these.
Move-Out Dates Are Flexible
Finally, home-buying companies will give you more flexibility when it comes to date. This is because, unlike traditional buyers, they aren’t in a rush to move in. If you need extra time to enjoy your home before leaving, these companies will give you the flexibility you need.
Potential Cons of Companies That Buy Houses
There are also some cons when it comes to companies that buy houses. These cons include the risk of being scammed, issues with back-door buyers, and lower offers than you would get when selling traditionally.
To avoid many of these issues, we recommend researching the potential companies that buy houses. To do this research well, go to the “know your options” section of this article.
When a Home Buying Company Makes Sense
Depending on what your needs are, a home buying company might be right for you. If you want to get rid of your home and it needs a lot of work, we’d recommend going for a house flipper. If you live in an area where there’s a big rental market, and there aren’t too many changes you need to make to your home when you sell it, we recommend you go with a buy-and-hold company.
If you live in a city area and want to sell your home fast, then we recommend an iBuyer. Keep in mind, however, that these companies are interested in homes that don’t have big repair needs. If you want to trade in your home for another one, then a trade-in company is the right choice for you.
Know Your Options
Now that you know what companies that buy houses are, how they work, and whether selling your home to one is the right choice for you, it’s time to know your options. When choosing the right company that buys houses, we recommend doing a few things.
Look at Reviews
The first we recommend is for you to look at companies that buy houses reviews. Take a look at reviews on sites like Angie’s List and Yelp. Additionally, you should ask around. Do you have any friends or family who’ve used a company that buys houses? Word of mouth is reliable.
Look at Fees and Commissions
Any time you sell your home, there are going to be associated costs. So, when choosing the right company that buys houses, look at their fees and commissions. Also, consider the cost of the home itself, since you’ll make less of a profit by selling your home this way than the traditional way.
This might help you not only find out which company is right for you, but also whether you want to sell your house the traditional way. Put together a spreadsheet with information on the potential home sale prices, fees, and commissions to decide what works best for you.
Think About Repairs
You should also think about whether doing any repairs might save you money. Even though this may seem counterintuitive, you might be able to get a higher price for your home if you do some cheap, easy repairs. Sure, many home-buying companies buy your home as is—but consider if repairs will make the sale easier.
This might end up having an impact on what type of home buying company you go with since more options might be available to you once repairs have been done.
When considering companies that buy houses, we recommend that you consider iBuyer.com. At iBuyer.com, we give you all the information you need when it comes to selling your home. We have spent the last 15 years buying and selling real estate, and we’re experts by now.
Join our iBuyer Marketplace and you can sell your home at a price you want and faster than anywhere else. When you do this, you’ll be listing your home on the iBuyer marketplace. All you have to do is submit your address and get an offer.