Here are the Pros & Cons to Selling a House to a “We Buy Houses” Investor
If you ever sold a home, you probably heard about, and maybe even considered using a real estate investor who offers to pay cash and close quickly. This is no longer the domain of small local investors, even big companies such as Opendoor, Redfin among others are entering this market.
The Pro’s of Selling to a Real Estate Investor
Get rid of the home quickly
While for sentimental reasons some people may not look for a fast sell, most people are. The advantage a seasoned real estate investor brings is simple cold hard facts, very little emotion. If the purchase makes financial sense, they want to close, and quickly as well. You’ve probably read a lot of horror stories of buyers backing out after making an offer, mostly due to inexperience and they let their emotions over take them.
No Tedious Task of Repairing
Most sellers look to fix up their home before selling, as this will bring the highest price. While this is true, it’s missing the cost element of the equation. Seldom does the update equate to 4 times the cost of the update, yet seasoned real estate investors have a list of contractors that typically do the work for a quarter of the typical home owner price. So it’s entirely possible you can get more money selling to a real estate investor over the general public.
In addition to the above, it’s a tedious task for a home owner to locate, hire, manage (or at least they should!) the contractors. If a contractor can take a short-cut, they will! Most bids are fixed bid, so the quicker they can do it, the quicker they can move onto the next client. On the other hand, the contractors know they need to take care of the investor and do a good job, as they offer a steady stream of work. Many contractors deal with feast-or-famine, so they value this greatly.
Another thing about selling houses to an investor is that the current state of the home doesn’t phase them. Consumer buyers typically want to buy a home that is “move-in ready”, but an investor simply determines the cost of the fix and moves on with an offer.
High Sales Certainty
Again, for a seasoned real estate agent, they only look at the financial numbers and it’s not an emotional purchase. In my 20 years of experience, I’ve only had to back out of a purchase a few times. For example, a seller didn’t disclose after signing the contract that he was in fact married, that the lady living with him was not just a girlfriend but his wife, and this was in a state that these sort of things mattered! She didn’t want to sell, so that ended that rather quickly.
Open to More Options in the Sale
Sometimes a seller will ask for payments instead of a single payment. For some sellers, this can also have tax advantages, as well as the comfort of a constant cash flow. This type of offer isn’t available with your typical buyer.
They Buy Properties That Can’t be Financed
Real estate investors are open to buying properties that are not eligible for financing. They either use their own cash, or cash within their network to purchase. When using cash, they don’t have to worry about FHA qualifications to purchase a home, such as it needs to be ‘safe’ to live in.
The Fair Few Cons
They are Looking to Profit
This may be a no brainer, but it means they have a certain price in mind given the costs and in investor speak, After Repair Value (ARV), that is, what the value is once the investor fixes the home up. This may be lower that what the seller would like to sale for, and if the home is in good enough condition, they may be able to sale to a retail consumer for more (be sure to account for the realtor fees to determine if you’d come out ahead).
They are Business People
While this can also be a ‘pro’, they are buying it not because they need it for themselves or family, but as a business. So they make and stand by their decisions differently. For example, I’ve heard many sellers taking an inferior offer solely because the buyer wrote a letter to the seller explaining what that home purchase would personally mean to them – such as the lighting is perfect for a planned baby room, etc.
The Bottom Line
Each seller makes their own decisions using their own unique way of viewing things, as well as external factors such as a loss of employment when making a decision on how to sell a property.
A real estate investor typically doesn’t charge to give a quote. So contacting one, letting them inspect the property, then giving an offer has no downside accept perhaps a little lost time if you decide not to accept.