Why Sell to an Investor?
It’s an interesting question and one that you may be asking, and you may want an answer to, and so we try to answer this question for you in this video and blog post, in an effort to help you gather the information.
Everybody knows that if you want to sell a home, it’s a pretty simple process. You call a real estate agent, they list it on the market, and you get some offers from people and sell the home. Pretty straightforward.
So why an investor? Why would you call an investor?
There are a number of reasons, actually, there’s lots of reasons, but there’s probably half a dozen popular reasons why people call investors and why they sell to investors;
1. Sell As-Is
2. Cash Sale
3. Quick Sale
5. Reduced Risk
6. Financial Stress
This is one of the biggest reasons why people sell to investors. Investors buy the home As-Is. Most often, investors will buy your home in its current condition. You (the seller) don’t need to do anything to the home. You don’t need to clean it, do any maintenance or any repairs or any changes. Investors will purchase the property in As-Is condition and investors do that for several reasons.
First of all, please understand that the investor is not going to live in the home. It’s not for the investor to purchase and move in and live. Therefore, the investor is probably going to make some changes to the home to improve it for the purpose that they have in mind for the property. It may be used as a rental/income property. It may be to sell to somebody else. It may be as a fix and flip, which means a total rehab to the entire home and bring it all up to standard and put in some nice features. We’ve all seen HGTV, and we all know what those features look like and what is trying to be achieved. Therefore, the maintenance is unnecessary, and those improvements may not be appealing to the investor.
Therefore, talking to the investor and getting an understanding of what their goals are and what they’re trying to achieve will help you make an informed decision.
When you’re selling it on the market through a real estate agent, you may get more money, it is true. I say to people when I’m talking to them that you’ll get the most money on the market. However, what you don’t know when you sell on the market is just what you are going to end up at the end of the sale process. So, before you list it, you are going to have to do some things to make it appealing to buyers.
You’re going to have to clean it and declutter it, maybe do some maintenance, maybe do some repairs and generally get the home ready for inspection. Oh, and by the way, the potential buyers want to see the home without the sellers present, so you need to get out and give the buyers an opportunity to see the home without the pressure of the sellers hovering over them.
Once your home has been inspected by however many people that come through to see it, hopefully you’ll get an offer, and if the offer is up around the price that you’re looking for, then you may accept the offer.
Once you accept the offer, there’ll be some inspections imposed by the buyer, and that could include a home inspection, termite and moisture inspection and possibly some other inspections. Home inspections are important to understand, because the home inspector is paid to find problems with the home. He is going to find problems with the home. That’s his job. And so, once the inspection’s been done and the report’s been provided to the buyer, then the buyer will determine whether they want to ask you for those repairs to be done or negotiate down on the price so they can cover the cost of those repairs. So again, you’re not going to know exactly how much that’s going to cost until the report’s been done and you’ve got a negotiation point with the buyer.
So when we buy it As-Is as investors, I can’t remember the last time we had a home inspection. We hardly ever get home inspections. The inspections that we have done is for our purposes, and that includes a termite and moisture inspection, which needs to be provided by law and we always get our general contractor to have a look at the home, because we want to get an understanding of how much we need to spend on the home to make sure it fits within our budget and our strategy.
Typically, investors always close on the offer that been offered. Investors typically always pay the amount of money that has been offered, and the inspections that have been performed are purely for the investors purpose for confirmation that once they purchase the home, the works are going to be completed within the budget that’s been allowed and the intended strategy is going to be implemented.
Another benefit of selling to an investor is that it’s a cash sale. Now, the investor is not going to turn up with a briefcase full of money, which some people have comically said, “Where’s your briefcase?” when the investor walks in the door. The cash sale term is an industry term. The term is to advise you that the investor has the money. It’s pre-approved. Sometimes it’s money in the bank and sometimes it’s a loan, but the money is coming from a pre-approved position. So our banks or our financiers, whoever they are, have already approved the purchase before the investor actually made the offer for your house. And so, the term Cash is an industry term.
The purchase and sale process still goes through a very similar process to when you sell on the market. There’s a title search, and then the paperwork is done with the city and the attorneys or the title company, and the home is transferred. The ownership is transferred from you, the seller, to the investor, and then the money’s transferred at that time. It’s a standard process that happens all across the country every day, all the time. But the difference is that an investor has the money in place to conduct the transaction, which is very important.
Typically, investors can work quickly. Capable Home Buyers always put 30 days on our purchase agreements. 30 days is a comfortable number. However, we have been able to close a lot quicker than that. The fastest we’ve ever closed at Capable Home Buyers is seven days. We’ve purchased a property in seven days. Typically, seven days is about the quickest that can be done. I would budget 7 to 14 days if you really want a fast sale.
Just the other day, an investor I know made an offer on a home on Monday, and on Friday he was in the attorney’s office signing the paperwork at the closing. So that happened in four or five days. So it can be done that quickly.
Why isn’t it just a straight transfer? Well, there’s other factors involved. There’s other people involved and the city is also involved. Any dealings with any city does take time. The title search process includes researching the title and satisfaction is determined to secure Title Insurance. Any additional information is obtained from the city and all the information is reviewed by professionals to ensure there are no issues now or in the future. Just understand that it takes time. It’s not something that can be done overnight or on the same day. It’s just a fact of life. But as I said, it can be done in seven to 14 days if you want it done quickly.
When you sell on the market and the buyer is using one of the traditional banks and particularly one of the big banks, they need 14 to 30 days minimum to be able to get their paperwork and get it through underwriting and all of those processes. So be prepared for that. It’s going to take some time to put it through the process. Not many real estate agents will tell you that they can get the sale process through quicker than 30 days. It really does take that long, and it’s unfortunate, but considering we transfer homes every day in the USA, you would think we’d be able to get it done a little bit quicker than that, but no, we just can’t.
The other benefit of selling to an investor is flexibility. You may be living in your home and you’re moving somewhere else, and you need the sale of the home to fund the purchase of your next home. An investor, because he’s not going to live in the home, and is not relying on you exiting the home so they can occupy the home, is more flexible in terms of when you exit. You are in a position to negotiate with the investor your exit at time of sale giving you flexibility with regard to exiting the property on your terms.
Although the closing process can be completed quickly and the money can be transferred quickly to you, there’s flexibility in terms of exiting the property and what’s left behind.
“When we say we buy it as is, oh, my God, we have bought some houses that are disgusting. There’s no other words that can be used apart from disgusting. And that’s fine. We take them as they are, and we clean them up and clean them out and then we start working on the house. I mean, that’s just the way it is. We as investors don’t have a problem with taking it as is, and we don’t have a problem with negotiating with you on your exit strategy to get out of the home. So it provides a lot of flexibility in that respect.”
I also believe that selling to an investor greatly reduces your risk. I know that if I come to your home and I make an offer, I’m making an offer from a position of having the money and knowing that we have a strategy in place for that house and therefore it’s a purchase we want to make as investors. We’re going to close based on that.
If we’re giving you an offer, we’re going to close. We’re not going to pull out because of financial reasons or we’re not going to pull out because of any other reason that comes up.
Often when a buyer on the market has a pre-approval from a financier, a bank, it’s a pre-approval and not an approval. An approval often comes the day or two before the bank is actually going to hand over the money at the closing. And so you’re under contract for 30 days and they still haven’t been approved until 24, 48 hours before they’re actually supposed to sign the papers and wire the money. Anything can happen in that time. It’s a fact of life. That’s just what happens. So that is one risk you need to be aware of.
The other risk, of course, is inspections and all of those things that we talked about earlier. There’s also less flexibility when you sell on the market. Often the buyer is moving out of one place and into the premise that they’re buying, which is the premise that you are selling.
If, for example, their lease runs out at the end of the month or they’re closing on the sale of their home on a particular day, they need to move into the home that they’re buying, which is the home that you are selling. This means you have to be out on the day or the day before closing. This is much reduced flexibility for you. The buyer needs you out at that time. If that doesn’t work for you, then you may pull out of the sale and the buyer may walk because it’s just not convenient for the buyer. And therefore, it increases the risks. It increases the challenges and the problems to do with selling and transferring properties.
An investor can also be more negotiable and consider your financial position. If you are facing foreclosure or if you are underwater on your mortgage or you have financial problems, the investor can help.
Capable Home Buyers purchased a home a couple of weeks ago from a lady who had terrible medical problems, and of course, I won’t go into any details, but she needed the money for her medical bills. We were able to come to an agreement on the house and solve her medical bill issue. Our offer was sufficient to also obtain alternate living arrangement (she purchased another house). We helped her with moving, getting rid of what was in her home. She left behind anything she didn’t want to keep and we greatly reduced her stress. We helped quite a lot. It’s very satisfying for us, extremely satisfying for us that we’re able to help someone like that.
We are able to stop foreclosure. We are able to help you with paying your bills. At Capable Home Buyers and investors in general, we buy houses. We are home buyers, and if you are looking to sell your home fast or just need to get out of your house, we have the solutions to help you with your situation.
I hope all this helps. If you want more information about considering selling to an investor, then I recommend you watch;
Selling Your Home to A Cash Buyer/Investor… pros and cons! By Dillon Hall
Tips On Selling Your Home To An Investor by Brant Phillips
And please don’t hesitate to give us a call if you just want to discuss or if you want to get a better understanding of the process or you’ve got some specific questions.
You can call our number on the website is 757 699-1201, and a member of our team will help you. Often I’m the one that’s answering the phone. Often I’m the one that you’ll get when you call, so you’re more than welcome to give me a call, ask a question, and if I can answer it, I will, or I can at least send you in the right direction so that you can get the answer that you need.
All the very best.