Over 900,000 homes were sold in the U.S. in July of 2020. Are you also one of the many homeowners who want to sell their home but don’t want to sell your home with an agent?
Whether you need a quick home sale or can’t afford your mortgage, you have other options other than a traditional home sale. Many homeowners choose to sell their home to an investor instead.
If you want to know how to sell your home, here’s more information about selling to an investor.
What Does It Mean to Sell Your Home to an Investor?
Real estate investors pay cash for homes that need a quick sale or for a property that’s having trouble selling. Investors will buy any home at just about any condition.
They do this because they look at homes as a business opportunity. They may flip your home and resell it to new buyers or they may even rent the home out to tenants.
Investors can solve many problems for struggling homeowners. For example, if your home requires repairs that you can’t afford, you can get cash for your home instead of worrying about renovations.
How Is Selling to an Investor Different From a Traditional Sale?
The main difference between an investor sale and a traditional sale is buyer intent.
A traditional home buyer wants to buy a house to reside in. They may use this home as their primary home or even a vacation home. Homebuyers have a perception of the home they want to buy. For example, they may want a home with a big yard if they have kids and pets.
They may also look at other qualities such as market value. If a buyer really loves your home, they may be willing to pay more than the asking price.
As stated previously, investors aren’t living in your house — they look at your home as a business strategy. Investors are also different; some may own a property or two for rentals and others buy multiple homes and flip them.
When Should You Sell to an Investor?
Are you unsure if selling to an investor is the best decision? Here are common reasons to sell your house to an investor:
Selling your home to an investor is ideal if you’re behind on payments and are facing foreclosure. You’ll be able to sell your home quickly and can get cash for your home.
If you inherited a home that you don’t want, selling to an investor is a great option. You don’t have to worry about that inherited property and you’re selling it quickly.
There may come a time when you can’t finance your property to another buyer. This can be because your home doesn’t meet permitting or safety standards. If this is the case, an investor can get your home off of your hands.
Does your home require many repairs that go beyond a traditional fixer-upper? If so, it may make more sense to sell to an investor. You’ll have to spend significant funds on repairs. If you try and sell your home to a traditional buyer, they may not be interested.
Escrow is when you’re trying to sell your home and purchase another one at the same time, but you can only purchase a new home when your old one sells. If this is the same, selling to an investor can expedite the process.
If you have a specific timeline to sell your home, you have more flexibility with an investor. Selling your home to a traditional buyer can be unpredictable. With the paperwork involved, this timeline can be longer than you would expect.
Divorce settlements require both parties to divide assets. If neither of you wants to keep your home, selling to an investor can be the best option. You can sell your home quickly and can divide the funds among each other.
11% of home sellers said they moved for a job relocation. If this sounds like you and you don’t have time to wait for a home buyer, you can sell your home to an investor. You’ll get cash for your home and you can sell your home quickly.
Pros and Cons of Selling to an Investor
Selling to an investor has many benefits, especially if you’re selling your home for the reasons above. But there may be some downsides to selling to an investor. Here are a few common reasons.
When you close your home, you won’t be lacking funds. You have cash in your pocket to use to buy a home, finding a rental, and more. In a traditional home sale, there’s always uncertainty when a buyer applies for a mortgage.
If you can’t afford to do extensive repairs, an investor will take your property off of your hands. Many investors specifically target outdated and old homes so they can fix them up and resell them.
Flexible purchase arrangements.
You’ll be surprised at how many flexible payment arrangements an investor can offer.
For example, what if you don’t want to own your home but you also don’t want to move out? An investor can buy your home off of you and will rent it to you.
As long as the two parties agree on the sale, you can sell your home quicker than a traditional sale. Rather than wait months, the selling process may only take a couple of weeks with an investor.
You might not sell your home at market value.
Unfortunately, many investors buy a home below market value or at a bargain. Before selling your home to an investor, it’s recommended you look up the market value and compare that to the price an investor is willing to pay.
You don’t know who’s buying your property.
Or, what they plan on doing with your home. Investors aren’t legally required to tell you who’s buying your home.
Does that make this sketchy? Most investors are either individuals or businesses who are in the business of flipping properties or renting them out. Some may also bulldoze your home to build apartments or other types of property.
For the most part, this isn’t a problem. But be sure to conduct your own research to be sure the investor isn’t accused of shady practices.
Longer to close with foreign investors.
Selling your home to a foreign investor isn’t uncommon. Unfortunately, the closing process can take longer if your investor isn’t domestic.
That’s because complex tax requirements and other difficulties may come into play. A foreign investor will have to work out the logistics of the sale, causing many delays in the closing process.
You may find a scam.
There are many real estate investor scams. For example, a foreign or out-of-town buyer will be interested in buying your home and may want to close immediately without even seeing your home.
Sounds too good to be true, right? Well, it is. They usually get you with unfavorable terms and even a false check. Not only are you out of money, but you now have no home.
Different Types of Home Investors
There are many types of home investors and all have different business goals with your home. Here are some investors you may run into.
Most investors want to flip your home. They will buy your home at any condition, make necessary repairs, and will flip them at a higher price. Since an investor wants to buy, fix, and sell the home quickly, they’re usually willing to work with homeowners on a fast timeline.
You may also run into what is called a buy-and-hold investor. These investors will purchase a property they don’t intend to live in; but instead of selling it, they hold onto it. They usually rent it out to tenants or use it as a vacation property.
There are many benefits of selling to a buy-and-hold investor. Since they plan on holding onto the property, they’re more willing to pay for the house at close to market value. This is also a strategy used by new investors, so the terms may be more lenient than with an experienced investor.
iBuying is one of the newest forms of investing. iBuyers purchase a large volume of homes in good condition on lower per-flip profit margins. You may have to pay a service or convenience fee, but this option is more convenient than the other options.
Here’s how the iBuying process works:
- You’ll answer questions about the condition and features of your home. This process is usually done online.
- The platform will store your information as well as data about your local market and other sales in your area
- The iBuyer sends you an offer and a contract
- After you accept the offer, an inspector will come over to confirm the condition and details of your home. If the inspector believes your home is in worse condition, you’ll have to pay a repair credit that’s deducted from the funds you receive.
- After closing, you receive your cash
Keep in mind, this is the best option for those who have a home in good condition but need to sell quickly. That’s because they can take significant funds from your pay if repairs are needed.
How to Choose the Best Real Estate Investor
Are you wondering how to sell your house to an investor? The internet is your best tool when finding an investor. These phrases generate the best results:
- We buy ugly houses in [city]
- Sell my house fast in [city]
- [City] home cash buyers
Since you’ll likely find many results, compile a list of different investors. Research them individually and separate them by the most reputable ones.
See if any of them offer a free consultation before choosing one. You’ll want to choose an investor who not only has the best cash offer but is also straightforward, has excellent communication, and is honest.
iBuying also offers a convenient way to get matched with an investor and receive your cash. The whole process is done online.
Other qualities to look for include:
- Has the cash on hand (or has a loan approved)
- Has a history of satisfied clients
- Responds quickly
- Is upfront and honest
- Will buy your house in any condition
- Will close when you need to
- Can visit your home and will give you an offer
- Understands your local real estate market
- Has local contractor connections
- Has a local title company connection
Keep this in mind when finding an investor.
Are There Any Costs When Selling to an Investor?
Traditional home sales include closing costs. But what about investor sales? If there are any costs, what are they?
First, the investor will usually pay all traditional closing costs. They may also handle other fees, such as inspections and HOA fees. Since an investor is paying cash directly, you don’t have to worry about paying real estate commissions.
But this doesn’t mean you’re off the hook. For example, you’re responsible for paying property taxes. If you have an HOA, you may still owe your dues (whether they be monthly, quarterly, or annually).
How to Avoid Scams
As stated previously, it’s not uncommon to be scammed by a real estate investor. Fortunately, just a little bit of research ensures you’re staying protected from scams.
First, most legitimate investors will have a website. If they don’t, ask for a portfolio or other materials to prove they’re experienced. If their website doesn’t have a list of purchases, contact their office and request their past properties and details.
Your local Better Business Bureau is the best place to check if the investor has any complaints. You can also read online reviews on social media, Google, and third-party apps.
When you do find an investor, never accept any money until after the closing date. All transactions should also go through an escrow or closing agent.
Sell Your Home to an Investor Today
Are you wondering how to sell your own home? If you need to sell your home fast or are selling an old home, you may not have success with a traditional home sale.
This is when an investor can come in. They will pay cash for any quality home. The closing process is quick and they handle most costs affiliated with a home sale.
There are many investing options, but iBuying is by far the fastest and most convenient option. To start the process, we invite you to see the value of your home. Access our home valuation tool here.