When you plan to sell your home, it’s common to think about selling to a homebuyer or an investor. There are advantages to selling to an investor, like not needing to stage the home and being able to finish the process quickly. It may seem like an obvious choice, but there are a few things you should know before you decide. If you’re wondering, “How much will an investor pay for my house?” read this guide to understand the various factors that go into an investor’s offer.
How Does Real Estate Investment Work?
Real estate investment is the process of buying property to use as an investment. Some “we buy houses” investors make this a full-time job, while others may investment as a form of passive or side income. Different types of investors look for properties that meet their needs and then calculate an offer based on the market, necessary upgrades, and their anticipated income or profit from the investment. Figures like after repair value (ARV) and net present value are critical to help house flippers and buy-and-hold investors to estimate profitability.
Overall, investors aim to buy real estate for a lower price, which means that they may be more likely to consider fixer-uppers or assist homeowners looking to get out quickly and avoid showings.
These transactions can look different from a traditional sale since many seasoned investors buy in cash to accelerate the closing date. This allows them to acquire the investment property earlier than the lender-based sale process, so, with due diligence, they can fix and flip a home in a tighter turnaround. In addition, an all-cash offer can typically be below asking price to give the investor more margin. This gives them more breathing room with potential rental income.
What Are the Common Types of Real Estate Investment?
There are several types of real estate investment. Investors who buy properties individually may want the home for a variety of reasons. Some home investors buy houses to renovate and flip within a few months for a profit. Others purchase properties that they can fix up and rent for long-term income. If the home is old or in poor condition, they may buy it so they can put a new house on the land.
There are also “hands off” real estate investment options that help investors diversify their portfolio. One example is purchasing REIT stocks that, under the right conditions, offer dividends. This option takes extra responsibilities like property taxes, mortgage payments, disrepair, and property management out of the equation.
Do Investors Make Cash Offers?
Cash offers are common for real estate investors. The benefit of cash is that the investor doesn’t have to wait for financing, which can take weeks from a traditional lender. This is an excellent investment strategy gives the investor an edge. Investors who make cash offers also don’t have to worry about an appraisal coming in higher than the offer price, and they may not get an appraisal at all. In a competitive market, getting in quickly is paramount for investors. It’s not guaranteed that investors pay cash, however, so you should ask to be sure. Knowing what type of real estate transaction to expect will help all parties make the best decisions.
What Price Will An Investor Pay to Buy A Home?
As a general rule, investors are looking to get properties for less than they would pay if they were buying a personal residence. This is especially true if your home will have repair costs after its purchase. Unless the market is extremely tight, they may offer less than the fair market value. Keep in mind that fair market value is based on the home’s condition. Investors are often willing to buy homes that aren’t staged or even cleaned, so they may not pay as much as they would for properties with recent renovations.
What Are the Advantages of Selling to an Investor?
Selling to an investor can be extremely convenient and faster than other home sales. Investors don’t tend to get stuck on things like the color of the carpet, so they could make a decision and write an offer on the same day. They are more educated than the average homebuyer, so they may need less time to negotiate a fair price for the home based on its current condition. If you’re in a big hurry or you don’t want to fix up the home, an investor might be ideal.
What Are the Disadvantages of Selling to an Investor?
Selling to an investor may be quick, but it doesn’t always give you everything you expect. The process of renovating and staging your home could increase its value by tens of thousands of dollars. Investors don’t expect that work, so they may not offer as much. While investors may not be as fickle as a regular buyer, they will negotiate their side more assertively and effectively. To them, the return on investment is the only thing that matters. If you live in a strong seller’s market, you might have more advantages selling to a homebuyer.
How Soon Can Investors Buy a Home?
The average home sale takes about 30 to 60 days from the date of an accepted purchase offer. Investors don’t want to risk missing out on their next great deal because they are busy negotiating a purchase, so they usually prefer to close quickly. They may be able to cut the time significantly, particularly if they are paying cash. In some cases, you could get to closing within a week or two.
Do Investors Require an Inspection?
Although an investor may or may not require an appraisal, they are more likely to schedule an inspection. Even an experienced investor might not notice every potential problem with a structure or its systems, particularly if they only have a short walk-through. As such, you can expect an investor to request an inspection and possibly more than one kind. They use this information to plan out their renovations and determine if the home is worth the money they offered.
Can Investors Buy Homes in Foreclosure?
Since investors usually prefer to buy properties that haven’t been staged and ready for sale, buying homes in foreclosure is somewhat common for them. They will also consider short sales, which means that the home is worth less than the mortgages secured by it. Foreclosures and short sales tend to take longer because there are more than two parties involved. However, investors gravitate toward these types of purchases because they tend to cost less than the average for the area.
Do Investors Buy Homes With Liens or Judgments?
Some investors want homes without additional liens or judgments beyond the seller’s mortgage. Others are willing to consider the option depending on the amount of the lien or judgment. Investors who plan to sell the home quickly understand that they may not be able to do so unless the title is free and clear, which means they would have to settle the debt beforehand. They might accept those terms, but they’ll probably make an offer that is lower to cover the additional costs.
What Happens to Existing Tenants?
A rental property that comes with paying tenants can be a boon to certain investors. Investors lose money when a property they want to rent sits empty, particularly if they have a mortgage or property management fees to pay. As a result, they are less likely to give notice to current tenants unless they have other plans for the property, like flipping it or building new construction. It’s also common for investors to buy a property and offer to negotiate a new lease agreement with the existing tenants.
Are There Fees Associated with the Sale?
The amount of money you pay to sell your home to an investor depends on a few things. Typically, you shouldn’t have to pay anything to the investor directly, like closing costs or other fees. However, if you have hired a real estate agent to help you sell the property, you may still be responsible for the commission or fees listed in the contract you signed. If you plan to sell your home to an investor as quickly as possible, it’s a good idea to discuss your goals when you consult real estate agents.
What Price Will an Investor Pay to Buy a Home?
Selling an investment house can be quite different from selling to someone who wants to buy a residence. There are plenty of positives, like a faster process, as well as a few disadvantages. At Marketplace Homes, we aim to make the process to sell your house as convenient as possible. Contact us to learn more about our services or to buy a home today.
Alicia Persson is a Content Strategist SEO writer at Marketplace Homes, utilizing previous years of experience on real estate teams that specialized in investments and property management. Before she joined Marketplace Homes, she was also a freelance writer for 7 years, leading to a specialization in real estate and home living content for boutique digital marketing agencies. During her writing years, she learned the basics of SEO and gained experience writing for many different clients, making her versatile at creating diverse content.
She is a proud University of Virginia master’s graduate and enjoyed her undergraduate years at the University of Mary Washington. When Alicia is not writing, she plays keytar and sings in a local 90’s rock cover band, or she spends time with her amazing family.