Why would someone sell their home to a real estate investor?
This isn’t an uncommon question. Most of us are used to buying and selling our homes on MLS with the help of a real estate agent. We make sure the house looks the best it possibly can and hope that someone likes it enough to make an offer on the property.
Selling to an investor isn’t traditional, but it’s more common than most people think. But why do some people reach out to investors instead of real estate agents?
Most of the time, property that appeals more to an investor than a homebuyer simply isn’t in good enough condition to sell on the MLS. Perhaps the owner hasn’t kept up with repairs and maintenance, and it’s usually very outdated. Sometimes, the home needs tens of thousands of dollars’ worth of work in order to be sold to someone who plans to live in it. That’s money the owner typically doesn’t have, and most aren’t wanting to dump money into a house they don’t plan to live in.
Sellers also go to investors when they need to be out of the property quickly. For any number of possible reasons, they don’t have time to list it through a real estate agent and wait for a homebuyer.
It’s a misconception that investors take advantage of sellers who are down in their luck. I can say with certainty that often it’s quite the opposite.
Consider a homeowner who passed away, and the home was inherited by their out-of-state daughter who has a busy life with children of her own. She doesn’t have time to visit the property or the money to maintain or repair it for a new buyer. In this case, it’s most likely easier to sell the property in as-is condition so that it isn’t a weight on her shoulders.
In another instance, say the property has been owned for 50 years by the same couple, and they don’t have the energy to keep up with it anymore. They’re ready to downsize into a more manageable living situation. The house has been paid off for decades, and they don’t want the hassle of cleaning the house out and preparing it to show well. An investor could make them an offer that includes cleaning out the property and donating what they’re able to a local charity. The homeowner only takes what they want and can walk away with cash in hand and a clean slate.
As a real estate investor, I want to correct that misconception. It’s common for us to go the extra mile to help the seller’s transition go as smoothly as possible — we’re in the business of helping others.
If you’re a homeowner interested in selling your property to a local investor, below are a few tips to keep in mind:
• Don’t worry about cleaning the property up or doing any repairs. The real estate investor willing to purchase your home will look past any clutter because they aren’t envisioning themselves living in the property. Instead, they’ll be focusing on the “bones” of the property and will be calculating repairs needed, so save yourself the added expense, and expect the property to sell to the investor “as is.”
• Be prepared to close quickly. This is good news if you need to be out from under the property quickly, because an investor can normally close more quickly than a traditional homeowner. In any case, be prepared for a faster process than you may be used to.
• You can decide how many investors you want to meet with and who you want to sell to. It’s simple these days to search online for local real estate investors, and you might even be receiving postcards and various mailers. You can decide who you’d like to have come out to see your property. Some homeowners will go with the highest offer they receive, while others prefer to sell their property to someone they connect with and trust. You do have a voice in the transaction.
• Feel free to ask how they came up with their offer. Real estate investors will typically pay a percentage of the after repaired value (ARV). The exact percentage varies, but it accounts for holding costs and a margin for their profit. They will also deduct necessary repairs from the offer. Keep in mind that most investors are able to secure lower-than-retail pricing for labor and materials, so their cost for repairs might be lower than if you were to rehab it yourself.
• There aren’t emotions involved on the buying side of the deal. Unlike when you sell to another homeowner, most investors won’t be emotionally involved with the property so it can be a clean business transaction. Depending on their business experience, most investors have done this enough to make it as easy as possible for both parties so that you can quickly sell the property and move on. As the seller you may have an emotional tie to the property, so be prepared for the different perspective on the other side of the transaction.
• If they’re able to, let the investors help you prepare to vacate the property. Whether you have lived in the home or inherited it sight unseen, you may not want to deal with everything in the property. Ask if your investor-buyer can clean the property out and donate what they’re able to.
When a motivated seller reaches out to an investor, they’re in a position of need, and it’s an investor’s job to help provide a solution. They analyze the property, offer the best price they’re able to and explain repairs needed on the property. This is a conversation that is meant to help the seller understand the process, as most don’t realize how easy it is to sell to a real estate investor. Ideally, it’s a win for both parties, and the seller is able to move on to the next chapter in their life.
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This blog was previously published on Forbes.
