Should I Sell My Home to an Investor?

Selling your home isn’t a one-size-fits all approach, and with so many different opinions about who you should trust to sell your home, it’s no wonder you may have questions.  In this article, we’d like to shed some light on a fundamental decision that you may face:  Should you choose to work with a traditional real estate agent and market your home to a wide range of home buyers in your area, or would it be more beneficial to sell your home quickly to a real estate investor, as a direct deal? 

Before you can decide “Should I sell my home to an investor?”, it’s important to understand the differences between a real estate agent and a real estate investor. Here are the main differences:

Profit Model

The basic definition of a real estate investor is someone who makes a profit from purchasing real estate directly from the seller. Investors often make renovations and resell the property at a higher price, or rent out and manage the property to see a return on their investment. The investor is focused on helping you get the convenience of selling your house as is and getting the best price for themselves while moving the process along quickly. 

A real estate agent is a middleman who helps sellers put their property on the market and navigate the complexities of a real estate transaction. These professionals list and sell property on behalf of their clients, making a percentage of the total sale in the process.  An agent is concerned with getting you the best price and/or beneficial terms. 

Broker Representation

Real estate agents are legally obligated to work under a real estate broker.  When you see agents advertising as “Keller Williams” or “Re/MAX” for example, the agents are generally self-employed, but they are working under the supervision of these brokerages, offering  them education, support and oversight.

Investors, on the other hand, don’t need any credentials to buy or sell property, as they are buying directly from you. They are independent business professionals, and while they are not required to work under a broker, they generally have a high level of personal investment in the sale. 

Licensing 

Real Estate agents must hold a valid license to sell real estate in their state in order to earn a commission through a broker.  They have completed training that includes how to best serve their clients and to comply with state and federal laws and guidance.

Investors, however, do not need a real estate license as they are only representing themselves in the transaction.

What does this mean for you?  

Reasons people choose to sell their homes to an investor instead of working with a Realtor.

• They want a quick sale. Real estate investors often offer a faster closing process  This can be appealing to homeowners who need to sell quickly due to reasons such as financial urgency, foreclosure, divorce, or job relocation.  When a home is inherited, heirs may choose to sell to an investor to avoid the responsibility of ownership or maintenance.
• They don’t want to invest time or money into home repairs or renovations. Sellers who have homes that are in disrepair or showing signs of delayed maintenance may find an as-is sale is the best way to avoid additional investments, time and stress when selling their homes. Investors often make offers that are not contingent on inspections.
• They don’t want additional fees associated with selling their home. There are many fees that arise in a typical real estate transaction, including agent commissions, transaction fees, and marketing expenses such as home staging and photography. 
• They don’t want potential buyers to tour their home. Listing a home on the open market often involves numerous in-person showings that requires the home to be clean and vacant.  Selling to an investor can spare homeowners from the disruption and inconveniences created by buyer showings.
• They want the security of a cash deal. Many real estate investors make cash offers, providing a guaranteed source of funds, or they can do creative financing with you. Cash offers may be especially attractive to homeowners who need immediate access to cash for emergencies or other expenses.  Selling to an investor can create a “done-deal” peace of mind.

When you’re considering the question, “Should I sell my home to an investor?”,  you should be aware that there are tradeoffs involved when selling to an investor instead of marketing your property to a large number of buyers on the open market. Possible downsides to selling your home directly to a real estate investor include:

• You will likely receive a lower sales price. Investors typically seek out properties that may be purchased at an amount that may be considered below market value.  However, you’ll need to factor in the potential costs of upgrading the home to bring it up to the condition necessary to sell in a competitive market.
• You’ll have limited opportunity to negotiate. Investors will generally offer a set price and closing terms for your property in its current condition.  While some investors may be willing to negotiate terms around timing or logistics, you will generally not have room to haggle on price.
• You are limiting your pool of potential buyers. If you live in a desirable area or your property has specific features that are or will be attractive to buyers, you may achieve a higher price if you market your property to a wider pool of buyers.
• You may not be sure who you’re dealing with. While real estate agents are licensed by the state and backed by a brokerage who has the duty to protect your interests, real estate investors are individuals acting on their own behalf.  When you choose to work with a real estate investor, you will be responsible for any due diligence regarding their reputation or ability to comply with the terms of the deal.

So, what’s the takeaway? If you’re considering selling your home, knowing these differences between real estate agents and investors is key. Your choice to work with either of these professionals depends on your goals, your appetite for risk, and the adventure you’re up for in the world of real estate.

“Should I sell my home to an investor?” Hopefully this article offers some insight into what the best choice may be for your unique situation. If you’re feeling confident, go ahead and take your pick—and if you are still feeling a little uncertain, call us first!  Our local pros can help point you in the right direction.