Options selling your home
You have many options when selling your home and selling a home in good condition usually isn’t a problem. However, there are times when you may want to consider selling your home to an investor. There are several myths surrounding selling to investors, but your real estate agent can help you decide your best options. Experienced Realtors will almost always have a few investors that they work with on a regular basis that will probably be interested in buying your home. Your agent can advise you of when your home is a better candidate to sell to a real estate investor rather than an end user.
Here are some of the situations where your agent might suggest you consider selling your home to a real estate investor.
#1. Your home has several expensive repairs
The first reason to consider selling your home to an investor is if your home needs repairs.
If your home’s kitchen and bathrooms are stuck in the 1970’s, you probably are looking at some expensive remodeling costs in order to get top dollar for your property. If you want to get top dollar you’re going to have to put out significant cash. A new kitchen can cost around $10,000 by the time you are done buying and installing new cabinets, appliances, flooring, etc. Bathrooms typically cost between $4,000 and $5,000 each, and installing new windows can cost you between $5,000 and $7,000.
Local utility companies may have programs that will loan you the money to make energy efficient upgrades such as windows or HVAC systems. Typically, these loans pay for the materials and installation costs, but put a lien on your property. If you are planning to sell and have equity, the lien would be paid during escrow from your proceeds. The costs however can often be much higher than if you paid a contractor directly.
You may be able to save on labor by doing some of the labor yourself. However, many DIY projects end up looking like DIY projects. Poorly done DIY projects are noticed readily by home inspectors and they will flag those areas as potential problems to your buyers.
Making repairs may actually cost you more
In the end, you may not really make that much more by doing all of the repairs yourself. You’ll probably spend more on materials and possibly labor than an experienced general contractor. If you hire a general contractor to do the work, they will typically add 20% to the cost of all of their supplies as well as any labor they hire to do your job.
When selling to a real estate investor, you don’t need to make any repairs or try to spend the money to make those repairs. An experienced real estate investor will buy your house as-is.
#2. Your home may be hard to get a loan on
The second reason for selling your home to an investor is to avoid dealing with banks.
Imagine receiving the following call from your Realtor. “Good news, your real estate agent has just informed you that you have a full price offer for your home. The buyers want to close escrow in 30 days.”
Wow, that really is good news and you get all excited. However, the buyers’ offer usually has one major contingency – their lender has to approve the purchase of your home by your buyer. I know they don’t usually say it that way. They normally say things like “contingent upon appraisal” or “contingent upon buyer receiving loan”.
In simple English, it is up to your buyers’ lender to ultimately accept your buyers’ contract. A good Realtor can help you navigate through all of this. Your Realtor can also help to make sure your buyers are qualified to buy your home. However, a typical real estate purchase contract in California allows the buyer 21 days before they remove their loan contingency.
When your buyers’ lender says “No”
Just imagine, you have taken your home off of the market for three weeks waiting for your potential buyers’ bank to approve their loan. What if their lender says “No” or want more documents from your buyer? Now your buyers aren’t able to remove their loan contingency. What do you do? Usually, this can be resolved, but it’s not completely unheard of for a buyer to cancel their contract because their lender won’t let them buy your house. Now, with your house having been off the market for 3 weeks and potential buyers having moved on, you have to start the process of finding a buyer all over again.
It’s not your house’s fault, it’s your buyer and their lender. Lender’s want to know what their money is buying. Remember, if your buyer is borrowing money to purchase your home, it’s really their lender’s money until they are paid back. If your buyer is using government backed loan, meaning FHA or VA, the appraiser is also required to inspect your home for potential safety and habitability issues. These are all good things to check, but if your home is in need of repairs, your buyers’ lender won’t approve the loan.
#3. You would like to get your money quickly
The third reason for selling to an investor is the speed in which you can get paid.
Why do people file their taxes online? It’s so they can get their tax refund sooner. Instead of mailing off their tax return via snail mail, they can file quickly and easily online. Then in a matter of days they can receive their refund check. Sometimes, people even opt to get their refund the same day by paying a fee to companies who will advance them their refund.
Maybe you are moving out of town and need the convenience and speed of a cash buyer. Or maybe you have another house you really want to buy but can’t without first selling your current house. Maybe you’ve inherited an unwanted hoarder house and you want to take the money to buy a home you can call your own. There can be many legitimate reasons people need to sell a home to an investor and get their money sooner.
In conclusion, selling your home to a real estate investor is not always the right choice. However in some situations where repairs, the lend-ability of a home and the need for a quick close can warrant selling your home to an investor.
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