If you sell your house to an investor without thoroughly understanding the process, it can be a big-time disaster.
It can cost you a lot of time. There are a lot of investors out there who will tell a homeowner that they will buy their house but then never close on the sale. These investors utilize little clauses to get out of the agreement that they have with the homeowner. It can be very frustrating to believe that you sold your house to a professional who is reputable and above board and then suddenly have to start all over.
Selling to an investor can be a stressful experience if you are unfamiliar with the market and process. It’ can scary when you don’t know who to trust. Being unsure about whether or not someone is telling you the truth can weigh on you emotionally as well.
Then, of course, there is the financial element. If the house is mostly or fully updated, you will usually make more money on the sale working with a real estate agent. How do you know that you are getting a fair price? If you just go to the first person that you find online or on Google search without performing your due diligence, you probably will not be working with an investor who is willing and able to negotiate a fair price for you.
If you are a Senior who is experiencing mobility issue or you simply need to sell your home quickly, the last thing you need weighing on your mind is the anxiety of working with an unreliable or even dishonest real estate investor. But, it is possible to sell to a real estate investor and create a true win-win situation for both you, the homeowner, and the investor.
In what situations does selling to an investor make the most sense for a homeowner? Selling to an investor is ideal for anyone who is looking to sell their host very quickly, meaning money in their hands in less than 30 days. The ideal customer for this type of service is a person who does not have a lot of money to put into their house for repairs or updates. Home that are in rough shape, have a lot of deferred maintenance, or cosmetically just do not match the neighborhood are ideal candidates for real estate investors.
Before working with an investor, it is critical to have your paperwork and numbers in order. First, you need to identify any mortgages taxes or other liens that are late on your existing house? Any investor is going to need to know this. Are there any impending foreclosures, any impending foreclosure deadlines, recent or impending bankruptcies? What is the payoff amount for your mortgage?
Is everybody on the title present and ready to sign the purchase agreement? Until everyone who has a stake in the home is prepared to sign, any attempt to close the deal will be a waste of time. If there are other family members or advisors that you want to include in the decision, have them on site as well.
Bring these three critical pieces of information to any meeting with an investor:
- The price that you would really like for your house
- The price that you would accept
- The absolute minimum price
Most of the time, if you just let people know what those are up front you will get a good deal. The kind of person you want work with will make you a fair offer and try to get you as much as they can.
In addition to asking questions about the state of the house and paperwork, you will also want to ask questions directly of the investor. The first question to ask is, how do you come up with a fair price for the home?
The key here is to ask the question and then do not say anything else. You just let them talk. You will learn quickly what is really going on. Some investors put a lot of heart and thought into it. They consider the timeline, the true rehab cost, holding costs, and how much profit they intent to make. Just like you go to your job and you want to get paid, so does a real estate agent, so does a contractor, and so does an investor. But do make sure that you are aligning with somebody that that is trying to create a win-win.
The next question is, how are you going to pay for the house? Do you have a proof of funds letter? If somebody was going to buy your home to live in it, they would have to qualify for the mortgage and they would have to have a preapproval letter, so why shouldn’t an investor also have to meet these requirements? Some investors claim to be a cash buyer, but they simply get your house under contract and then do what is called an assignment of contract. There is nothing wrong with this; it is not illegal in our state. However, it is important to be aware of what is going on. Problems can arise if the investor backs out of the deal before closing.
Next question: If I perform repairs on the house, what will that increase the value of the home? What condition can I leave the house when I sell it to you? Many investors allow sellers to leave any items they do not want to take with them and that is a big benefit, especially for people moving into a senior housing facility. Families can take the items they want from the home and everything else is donated to a local charity.
There are several other questions that are important to ask. When can we close? Do you have any references? (Do not forget that one!) When will you need to access the property? When will the utilities and insurance be cut off? What does the closing process look like? Who pays additional lawyer or closing costs? There can be additional costs if, for example, the legal documents that you are using to sell the house need to be reworked.
Selling to an investor can be a great opportunity in the right circumstances. Evaluate your home’s condition, do your research, and thoroughly interview any potential investors before signing the contract.
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