Are you curious about how selling your home to an investor works? You’re not alone! Many people are interested in this process, but they don’t know where to start.
There are a lot of questions that they ask themselves. Such as, How does it work? What are the benefits? Is it right for me?
And the question you might be asking yourself is how does selling your home to an investor work?
In this blog post, we’ll give you a basic overview of the investor home buying process. Keep reading to learn more!
What is an Investor?
If you are a homeowner who needs to sell your house quickly, then selling your home to an investor may be the best option for you. Investors are people or companies that buy homes to fix them up and resell them or hold them to rent them out.
They usually offer decent prices for the home, and they can close the sale quickly so that you can move on with your life. If you are interested in selling your home to an investor, then here is what you need to know.
An investor is someone who invests money in an asset to make a profit. The investment can be in something tangible like stocks, bonds, or real estate. It can also be intangible like intellectual property or goodwill.
Investors are often people whose net worth can vary. They typically invest money into things that they believe will produce a return on their investment. They may invest for personal financial reasons, such as retirement, or they may invest for professional reasons, such as to generate profits for their company.
What are the Advantages of Selling Directly to Real Estate Investors?
Selling your home to a Real Estate Investors can be a big decision. However, there are some advantages that you should consider before making a decision.
Investors can afford to buy your house for cash and close the deal quickly. They also don’t need to worry about repairs or renovations because they will purchase the house as-is.
Another advantage is that an investor can close property fast. How fast can they close? Typically an investor should be able to close within 10 to 15 days.
When you sell your home to an investor you don’t have to worry about meeting the condition of the loan.
Typically when you are dealing in a transaction and the home needs a lot of work. You will have to make sure the house can pass lender conditions.
Lender condition is an important aspect of making sure a property closes. If for some reason the home doesn’t meet the lender condition.
Then certain repairs will need to be met to make sure that the home passes lender conditions.
Another advantage is a Real Estate Investor will typically pay all closing costs including the title policy.
If you want to use your title company then you can let the Real Estate Investor know that you will be paying the title policy and close at your title company.
Last advantage of selling to a Real Estate Investor. Typically they pay in cash for the property.
Cash is king and when you are dealing with Real Estate Investors it’s important to make sure you verify that they have the cash to close on the property. This is typically done by presenting a lender letter or Proof of funds.
Remember, always get proof of funds when you are dealing with Real Estate Investors to make sure that they are qualified to purchase your home.
What are the Disadvantages of Selling Directly to Investors?
Now that you understand what some of the advantages are when you sell your home to a Real Estate Investor. Let’s talk about some of the disadvantages.
One thing to keep in mind when you are selling your home to a Real Estate Investor is the fact that the Real Estate Investor is not going to offer you the full asking price for your property.
So you are wondering what would a typical offer look like when you are dealing with a Real Estate Investor? Glad you were wondering! 🙂
Say that we have a home that you want to sell in Richardson Texas for $340,000. You have done your homework using Zillow Estimator and You asked some Real Estate Agents to see what properties are selling for in the area.
You know your home needs about 35,000 of work. But you want to price your home based on Zillow Estimator of $340,000. So you call We Buy House Investor and you say to them you have a home and want them to make you an offer.
So they come out to you, and view the home and they realize that the home does need a lot of work but they have an estimated repair cost. $40,000.
Typically offer will look something like this:
$340,000 asking price
$40,000 repair cost
$340,000 x .70 = $238,000 – $40,000 repairs = $198,000 offer price.
| Asking Price | Percent Off Asking Price | Repairs | Offer Price |
| $340,000.00 | 60% | $40,000.00 | $164,000 |
| $340,000.00 | 65% | $40,000.00 | $181,000 |
| $340,000.00 | 70% | $40,000.00 | $198,000 |
| $340,000.00 | 75% | $40,000.00 | $215,000 |
| $340,000.00 | 80% | $40,000.00 | $232,000 |
| $340,000.00 | 85% | $40,000.00 | $249,000 |
“Above chart shows you examples of different percent off the asking price minus the repairs.”
Each investor is different so keep this in mind as well when you are closing with them.
Some investors will add and or assign by their name. Typically you will see this on the contract as James Doe Williams and or assigns
What does this mean? What and or assigns means is it allow a person to assign the contract to someone else or another company.
So the and or assign person will be the one that will close on your home, not the original person that signed the contract with you. This is considered an assignment of contract.
When an assignment happens the original person on the contract will notify you that the contract has been assigned to someone else.
They will typically say that this is a business partner or a company they want to take title in.
How Realtors Can Help With This Process
Realtors are a good source that can help when it comes to wanting to sell your home to investors.
If you are looking for investors to make offers on the property is not a bad idea to allow a Realtor to come in and do a Market Analysis on the property.
Realtors do have access to investors and they can help assist in making sure that the transaction is a win, win for both parties that are involved in the transaction.
If the property doesn’t qualify for regular financing a Realtor can list the property for sale and invite cash buyers to come in to view the property and make offers on the property.
The benefit when doing this is you will have someone who is working with you and who is making sure that you are getting the highest amount possible for the property.
The goal is to make sure you are receiving the highest amount for your home.
What does the investor do after they close on your home
When the investor closes on your home the investor will begin the process of getting the home ready to do two different things.
They will either get the home in condition to sell the property. Or they will get the property ready to rent.
The process works in a manner that the investor will bring in the contractors who will do the necessary repairs to get the home ready to sell to the end buyer.
Typically the end buyer will be someone who is going to live in the property. Also, the investor will fix all necessary conditions of the property. This will include: foundation, roof, exterior paint, interior paint, updated kitchen, room additions, redesigning the home, and even tearing down the current home and putting up a new home.
The investor will also cure any lender condition necessary for the home to pass FHA 203B, VA, or conventional financing.
When the investor rents the home out. Some of the same things will occur. The investor will typically fix the necessary things to make the home appealing to renters.
They will go in and also add some things to the home such as new appliances. The investor will then turn around and figure out what the market rent rates are.
Once they have the information they will turn around and put a for rent sign in the yard, place ads, or hire a Management Company or Realtor.
How Does Closing Work With A Investor
Closing with an investor works the same way as a regular transaction. On the contract agreement typically investors will offer to pay all closing costs.
Therefore, the investor will want to close at their title company. If you have a title company you are using you can pay the title policy and let the investor know that you would like to close at your title company.
Typically, in a transaction, the person that pays for the title policy has the choice to use their title company.
When title is open, the escrow officer will send the file out to a title examiner who will research the title. This process allows you to find out whether or not you have any other liens on the property. When the title policy is being checked you will receive a title commitment and this will show you if there are liens on the property.
These liens normally consist of mortgage liens, judgment liens, federal liens, contractor liens, city liens, and tax liens.
The one lien that supersedes over all the other liens are Federal Tax Liens
Remember, if any of these liens show up on your title work, it could delay your closing. It all depends on what it is and how long it takes for the other party to respond to the request from the title company.
When this step is completed. The title company will issue the commitment to the Real Estate Investor.
Be prepared to move out quickly – the investor will want to get started on fixing up the house as soon as possible.
Conclusion
Buying a home is one of the biggest financial decisions someone can make. You must understand all your options, and how each decision will impact your future finances.
Selling your home to an investor is a great way to free up some cash so you can purchase another property.
But there are also many other reasons why this might be the right option for you, such as reducing debt or taking care of family issues.
If you need help understanding what it would take to sell your house or another type of investment property to an investor, give me a call!
I am here to answer any questions about my services as well as a guide to help home owners get there property sold fast. Let’s talk soon so we can get started!