Pros and Cons of Selling to a Real Estate Investor

Pros and Cons of selling to a real estate investor. That is today’s topic.

I jotted down some of what I consider to be the Pros and Cons of Selling your home to a real estate investor.  These factors apply whether you are selling to an individual investor or some of the companies you’re seeing out there, like Open Door.

What can you expect when selling to an investor rather than the traditional approach of listing your home with a real estate agent?

PROS

1. A quick sale. I had investors who closed in 5 – 7 days as opposed to the usual 30 -45 days. A cash investor can close quickly.  So, if you need a quick sale this is a big advantage.
2. No repairs. Many investors are going to accept your home in as is condition. Not having to deal with repairs and fix-ups can be another advantage. If you choose to sell to a retail buyer you can expect then to want the home to be in move-in condition.
3. A flexible closing date. Investors can close quickly or, if you need some extra time to move out they can accommodate you.  Since they are not going to be moving into the home they have more flexibility with the closing date.  The investor may even allow you to lease back the home if needed.
4. No real estate commissions.  This isn’t always the case, but often it is. In fact, some of these new investor companies don’t call it a commission, but rather a “service fee.”  What looks to you like saving the commission can turn into 7-10% fees once done.

CONS

1. You can expect to sell the home below market value.  How much of a discount? I would say you can expect a minimum of a 10% discount if selling to a novice investor. An astute investor is going to want at least a 20% discount.
2. You might get “beat up” over home inspection issues. This is especially true of companies like Open Door. Up front they are going to offer you what looks like a market value price.  Then once the inspection is completed they are going to present you with a long list of expensive repairs. For these repairs they are going to demand 3-5% or more credit in lieu of repairs.  That’s not always the case. I’ve worked with many fine investors who do their best to make the transaction a win/win.

I recommend that you reach out to your trusted real estate professional whenever you consider selling to an investor.  It might be the best way to go or it might not.  If you ask me, I’m going to tell you the truth.

Dan Forbes 512-516-4666.