Pros and Cons of Selling To an Investor
Are you having trouble determining or communicating what value you bring to a seller? When I first started this was difficult for me to explain to a seller so I wrote the below Pros & Cons to help guide the conversation with sellers.
I hope this can help you as much as it has helped me! Enjoy!
If you’ve explored options to sell your home, you’ve most likely run across one of these: the option to sell to an investor, a bandit sign on the road that advertises: “FAST CASH FOR YOUR HOUSE”, or a letter from someone looking to buy your home with cash. So what’s with these so-called “investors”? Are there benefits to selling to an investor? The short answer is an absolute yes! But investors aren’t a fit for everyone. Below are the pros and cons of working with an investor to help you determine if that’s your best option.
- Cash offers – Has a buyer been interested in your house, but then, weeks down the road, you find out he/she can’t qualify for financing or the bank appraisal was too low? As the seller, this can be an emotional roller coaster. With a qualified investor, you will receive a cash offer; no need to worry about appraisals or financing!
- Selling “As Is” – Have you put off updating the worn-out carpet, painting, fixing the roof, or any other costly repairs? Most retail buyers will want to purchase an updated property with little-to-no repairs or issues (which also allows the seller to get top dollar). There’s no need to do any repairs with an investor. A qualified investor will buy a house (at the right price) in any condition, whether the home has fire or flood damage, has foundation issues, or is just plain out of date.
- Fast Closings – Need to sell ASAP or on a particular day? Qualified investors are usually flexible with the closing date, allowing the seller to close within a few days or on a date of the seller’s choice. In contrast, when using conventional financing, which a large number of retail buyers do, it takes 30-45 days (assuming everything runs smoothly) from the time the contract is signed. If the buyer has any issues with the paperwork or the bank, it can take upwards of 60-90 days! Using an investor almost always results in a faster closing date.
A qualified investor has more flexibility to give you the end result you desire, whether that’s taking over payments, doing a leaseback, helping with moving costs, or getting cash in your pocket FAST.
- No Commissions – Common realtors’ commission is 3% for both the buyer’s and seller’s agents (6% total). That’s $12,000 on a $200,000 house! With an investor, there are no commissions, fees, or closing costs, which can total between 8-10% of the sales price.
- Problem solvers – Why are you selling your house? To move to a better school district for your kids? Relocate for another job? Eliminate the hassle of an inherited property? Relieve the stress of maintaining a home? Save your credit? Or sell just so you can move on to the RV life with your loved one? A qualified investor has more flexibility to give you the end result you desire, whether that’s taking over payments, doing a leaseback, helping with moving costs, or getting cash in your pocket FAST. Investors will do their best to find a solution that fits your needs.
- Investors Do Not Need a License to Buy – With no license requirements, there’s uncertainty about an investor’s morals and qualifications. Who are they? Have they ever bought a house before? Are they using the correct paperwork? Are they trying to scam you? Yes, unfortunately, there are investors who operate with lower levels of integrity. To protect yourself as a seller, vet the buyer by asking for references, testimonials, and proof of funds, and ensure he/she is using a TREC contract with earnest money. To protect Texas sellers, we compiled the Texas Home Selling Guide that details how to vet a buyer and ensure you are protected with a fair contract. You can find the link to download the Texas Home Selling Guide here.
- Homeowners Will Likely Sell Below Market Value – Are you willing to wait the 30, 60, 90, 150+ days it may take to get market value for your home? Typically the way to get the highest sales price is to list the property on the Multiple Listing Service (MLS). You will have more exposure to buyers looking at your property. However, when you list the property, you will incur costs that we mentioned earlier: closing costs, holding costs, commissions, buyer-wanted repairs, and more. Not to mention the inconvenience of keeping your home show ready and scheduling showing times. Your situation is unique and you’ll need to do the math to determine what it will cost to list your house with a realtor versus an investor. The math may surprise you!
There you have it, the biggest upsides and downsides of using an investor. In the end, you must conduct your own research, vet the investor, and do what best fits your situation. Remember, our Texas Home Selling Guide will help you with the vetting process. If you have time and you don’t mind showings and keeping your house show ready, then listing your property may be your best option. However, if time and convenience are important to you, then an investor may be the best option.