Should I sell my home to an investor?
When selling a home, most people wish they could find a buyer who had cash in hand. It’s generally not that easy, and there are stipulations put on cash purchases like this. Therefore, when an investor shows up, it’s tempting to go with the deal and get out quickly. Before you do that, you should understand the benefits and drawbacks of working with an investor.
Most home buyers are families, couples, and individuals who want a place to live. They could be searching for a property to raise young children or a forever home they never move from. Likewise, they consider this an investment, but they’re not what most would refer to as investors.
Instead, investors are companies or people who purchase a home to make money. Negotiations often go very differently and should be easier than if the buyer planned to live onsite. Investors usually work well for many situations, but it’s important to understand the pros and cons first.
Benefits of Selling to an Investor
Less Risk of Lack of Funds
Most investors pay with cash, so you don’t have the uncertainty as selling to a traditional buyer. There’s no need to worry about pre-qualifying for a mortgage. Sometimes, buyers are preapproved for loans, and the lender decides their creditworthiness is no longer the same, refusing to provide the funds necessary to get your home.
Before signing a purchase agreement with the buyer, ask for proof of funds. This might come as a money market or bank account statement that indicates liquid and cash assets in amounts that exceed your home’s purchase price.
Investors don’t plan to live in the house, so they don’t care if you’ve updated the kitchen with granite countertops or bought new toilets. Many times, investors search for homes that are outdated and old to fix them up and then flip them. You can save money because you’re not making extensive repairs and renovations.
More Flexible Purchase Arrangements
If you’re facing foreclosure or want to get out of the game without moving, an investor could be the right choice. They might agree to cover the mortgage payment so that you don’t have a black stain on your record. Others might rent the house to you; this is called a sale-leaseback transaction.
Quicker Closing Times
Generally, investors purchase homes in cash, so you can sell the property as soon as you and the other party agree on the sale conditions.
The average time it takes for a seller to close with an investor offering all cash is a few weeks. If the seller works with a traditional buyer, it could take a few months.
Cons of Selling to an Investor
Might Not Get True Market Value
Typically, investors want to buy houses at below-market value and prefer a bargain. They don’t have to tell you what they’re planning for the home, such as tearing it down and building apartments, so you may not even know the true market value.
If the investor owns the land adjacent to your house and wants to start a large commercial project, they should be willing to pay more than a family searching for a place to live. Make sure you know what they plan to do with the property to get a good idea of your true market value.
Might Not Know Who Buys the Property
Investors aren’t required by law to tell you who is buying the home. Therefore, it could go to a landlord who has shady rental practices or a developer who plans to tear the house down and put in apartments. You can ask, but they don’t have to divulge that information.
Could Be Working with a Non-reputable Investor
Not all investors are a highly reputable company that offers a smooth closing process and a fair cash offer. Therefore, it’s crucial to research companies and investors before you sell to them or sign anything.
Read reviews from previous clients and check with the Better Business Bureau to see if they’re registered. Remember: no company has to be part of the BBB, and that doesn’t automatically make them non-reputable.
Might Take Longer to Close with a Foreign Investor
Foreign investors (those who aren’t US citizens) might face negative tax consequences by buying your home. Therefore, the sale might be delayed for many months while they work out all of the logistics. It’s generally wise to find out where the investor is located to avoid such delays or make sure they know you want to close quickly.
Getting an all-cash offer on your home could be a dream come true for you, but it’s crucial to research investors thoroughly. Likewise, you may want to ask what they wish to do with the property and ensure that you get a good price for the sale.
At Falcon Home Buyers we always provide fair offers and streamline the process to make your life easier.
This article is meant for informational purposes only. We always encourage you to consult with a professional advisor regarding your situation.