Should You Sell to an Investor?

Written by Ashley Sutphin Posted On Monday, 25 October 2021 00:00

There’s been a lot of news recently centering around investors buying homes. If you have the opportunity to sell to an investor, should you? There are pros and cons to both selling this way and selling on the open market.

The following are some things to know about what it might mean to sell to an investor and what you should consider before doing so.

Buyer Intent

The difference between selling your home to let’s say a family and selling it to an investor is what each intends to do with it after they purchase it. A family or individual is buying the home so they can move in. An investor wants to make money from it themselves, although there are different ways to do that.

For example, an investor might want to rent it out or flip the house and resell it shortly after buying it.

Many Wall-Street backed institutions are investing in properties and even buying entire neighborhoods around the country right now.

 If an investor is going to buy-and-hold, meaning they might keep the investment for the long-term and they’re counting on perhaps rental income and property appreciation, they’ll usually target single-family homes or maybe condos. A buy-and-hold investor will often want a property that’s already in good shape.

A house flipper will go for a house in poor condition, and they’ll expect to get it at a price reflecting that.

There’s also a relatively new concept called iBuying. iBuyers offer an online selling experience that’s convenient for the seller. iBuyers usually base their profit-making strategy on volume, but they might make less on each flip.

What Are the Benefits of Selling to an Investor?

If an investor approaches you and wants to buy your home, there are some upsides to this. These include:

  • No concerns about financing delays. The vast majority of buyers finance the purchase of a home. That makes a transaction more complex and time-consuming. Financing issues are one of the most frequent reasons deals fall through. When someone is buying a house with a loan, it takes an average of around 45 days to close. A real estate investor is likely to pay cash, and you might be able to close in days rather than months.
  • Investors will buy homes as-is. Some investors target homes that need work, and otherwise, you might not be able to sell your home without making repairs and putting money into it that you might not have.
  • When you sell to an investor, you don’t have to do a lot of prep work. Basically, you can sell it to an investor before it hits the market, so there are no staging, open houses, or showings to deal with.

Are There Downsides?

The biggest downside that comes with selling a home to an investor is the potential that you’re going to get less money in many cases than you would on the open market. The key driver for an investor is profitability. They’re going to want to maximize their profits as much as possible. On the open market, buyers want to find a house they see as their home, and they might form an emotional connection to your property. That emotional connection can push them to pay a premium that an investor isn’t going to be compelled to.

You might also personally not prefer to sell to an investor because you’d like to see your home go to someone who will love and appreciate it as you do.

What to Consider

If you’re debating whether or not selling to an investor is right for you, think about the following:

  • Do you need to sell your house quickly? If you’re on a tight timeline and faster is better, an investor is more likely to facilitate that than an individual buyer.
  • Is your home in good condition? Does it need work or repairs? If it does need work, selling to an investor who’s going to flip it might end up being one of your only options. Flippers want as-is properties that they can get a deal on. If your home is in good condition, iBuyers might be interested.
  • Do you have the cash on hand to do repairs? If your home needs expensive repairs that you can’t afford to make, it’s going to be harder to find a traditional buyer.

 

Finally, what are your plans? Do you have a property you’re hoping to buy already? If so, you may need the proceeds from the sale of your current home to make that happen.

There’s no correct answer as to whether or not you should sell to an investor. It’s really all about your situation and what’s right for you.

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