“Real” Real estate investors first try to add value and information to residential and commercial sellers and ultimately they buy property to improve the value of neighborhoods and of course – earn a financial return from the risk and hard work they do. Just like investors in stocks and bonds, Real Estate investors take financial risk to gain a profit. Real estate investing includes fix-flips, rentals, Master Leasing, Contract for Deeds and holding rental property for appreciation.
There are many advantages in selling property to a real estate investor as compared to a customary real estate agent process –
No Realtor Commissions Selling listing on the MLS pay upwards of 6% realtor commission. Real estate investors never charge fees.
Real estate investors charge no commission, buy “as-is”, close fast, and make cash offers in under 24 hours.
They Buy “As-Is” Investors buy “as-is”. The seller makes no repairs, no promises, has nothing to fix nor does she spend time going round and round about repairs and quirks of traditional buyers. Real estate investors “earn their profit” by acquiring houses that need renovations that the owner didn’t have the skills, experience, cash or ability to fix. Traditional home buyers haggle about repairs which substantially delays home sales.
Offers in 48-Hours (or less). Cash home buyers make offers quickly for cash and It only takes investors just a few minutes to put together an offer. Unlike typical buyers, there is no lengthy deliberation to figure out what the investor will pay.
Cash Purchase. The KEY difference in working with real estate investors is that they acquire houses for cash (not mortgages). Mortgages take months for approval and banks decline mortgages on homes for whatever reason they decide poor – or they can disqualify the buyer based on qualifying factors, such as income ratio or bankruptcy.
Lightning Fast Closes. Investors close in days. The average mortgage based on the date shows that conventional mortgages take 43 days to close. FHA and VA (Government) loans take even longer. Since investors control their cash reserves, once there is price agreement, the time for a wire transfer to your bank account is the only waiting required which can be done typically in 72-hours or less. Pro buyers also close quickly because there is no negotiation or inspection required to verify condition for “as is” sales. Fast closing saves expenses, taxes, insurance, daily maintenance, and utilities.
Single Showing/Inspection. Realtors listing on the open market schedule many showings to generate as many offers as possible. Hundreds of people might walk through your living space. Open houses attract “tire kickers” with no plans to submit an offer. Trulia reports one out of 10 showings gets an offer. Investors just need a single walkthrough to inspect and even buy site unseen. Professional buyers make offers on many types of property so they are unlikely to decline to make an offer if the value is there as an investment.
Selling to a real estate investor has some downsides.
Your offer is going to be based on a formula for profit – which is typically 35 to 45% below “Market Value”. However, if you consider the non-expense of repairs, listing costs, buyer assistance in closing costs, carry-costs while waiting (mortgage, utilities, taxes, insurance….) as well as the 6% commissions and potential capital gains taxes, the real difference is far less than most owners think!
An investor’s goal is to earn a profit, while a regular owner occupant’s goal is to find a place to live. Investing large amounts of private cash comes with a risk, a significant amount of work, (did I say RISK) and the premium cost of the money itself! Buyers utilizing a “traditional mortgage” may offer more because it’s not their money/risk!
Buyers of Hard to Sell Property
Professional home buyers purchase select ‘opportunity based’ property and hard to sell property, including eviction, foreclosure, probate/inheritance, and needing repairs. Buyers often back out as well or get kicked out of their loan due to underwriting.
Problematic properties can be a headache . . . and every month expenses pile up higher and higher and whether you find a traditional buyer is as much luck as it is skill.
Real estate investors pride themselves on buying homes that aren’t apt to sell through realtors and the reasons your not selling your house may not be apparent to you.
Here are the common circumstances where a professional buyer can help complete a challenging sale:
Problem Tenants For investor properties, the tenant just stops paying rent at times or destroys the property for no apparent reason. Real estate investors have the skills and finances to buy the rental property for cash, hire an attorney for eviction, and repair the property to its former glory.
Foreclosure. Behind on the rent? Bank threatening foreclosure? Delinquent mortgages ultimately lead to property foreclosure and bank re-possession. Investors have FAST CASH ready to close fast if foreclosure is looming. Investors also frequently allow owners to rent-back after closing, so you still have a place to live,
Probate &Inheritance Many inherit old and unwanted probate properties that they don’t know what to do with. Unfortunately the elderly struggle at times to maintain houses and may fall behind on mortgage and taxes, maintenance and upkeep. Inherited property requires lengthy litigation and court approval and probate if there is no will or trust prepared in advance. You need a buyer who understands these circumstances and conditions. Investors are suitable probate buyers.
Violations & Repairs Often, houses investors are called on to buy need substantial repairs! Real estate investors specialize in repairing property and paying fast cash before violations cause the owner to be foreclosed on or before they need to file for bankruptcy which ruins credit for 7-years or more!
Finding a Qualified Real Estate Investor
Finding an experienced real estate investor who puts your needs first and is ready to make a cash offer on your property not easy!
The Internet Method Professional cash buyers often have an online presence to connect with home sellers. Type “sell my house fast” and the name of the city on search engines like Google, Yahoo, and Bing. A list of local real estate investors who will buy your house for cash is “easy” but finding those who are honest and ethical is not!
The Direct Mail Method You may receive a notice (s) in your mailbox in the form of letters and postcards. Investors send mail to homeowners who they believe need to sell such as those with old houses, foreclosures, evictions, back-taxes, violations, probate/inheritance, or vacancy. So if your house seems to fall into any of these categories, you may receive investor correspondence via mail.
“For Sale By Owner” & MLS Listings Most are familiar with the MLS or “for sale by owner” listings to find professional cash buyers. The key is to accurately write the property description and offer terms. Offer terms should be “CASH ONLY”. Include phrases like fixer-upper, investor, cash, repairs, renovations, or handy man in the description. If you don’t want entice regular homebuyers who will waste your time – be clear in your post about property condition and realistic about your price.
Local Realtors – Agents Although every home owner is familiar with the downside of realtor commissions, local real estate agents keep “cash buyer” lists of investors that buy houses “as is” for cash. If you’re struggling to find an investor in your area, seasoned local agents who have your best interest in mind can direct help you find a fast solution to help you.
Vetting Real Estate Investors
Selling property is a significant financial decision. Not all investors are created equal. Working with a professional, experienced, and honest real estate investor is critical for a successful transaction. Do your homework, know the right questions to ask and ask for referrals!
Local Investor You Can Meet and Talk To There are discount home national consolidators that offer to buy houses anywhere, but we suggest working with local investors who know your market. You see, those national companies don’t actually buy houses – they are “middle man” to local investors and will offer you even less than the local investor as they must make room for their profit and they are intimately familiar with investors simple formula to qualify their investments in property. The national company pretends to be the buyer, but unbeknownst to you, brokers to a third-party. This is called “wholesaling”. Even in today’s fast paced world of technology and hands on communications, there are risks when you never meet or see a person. A good way to confirm a trustworthy investor is to meet and discuss the sale.
Real Business Professionals Authentic investors are connected to local real estate and professional organizations. The local Real Estate Investment Association, REIA (Real Estate Investment Assn.) and local County Real Estate Investment Associations are examples.
Video Testimonials Be careful with these as video testimonials, bottled endorsements and the like can be valid or fake information to give you a false sense of security! The real test is to meet your investor, ask questions, ask him or her for personal references. If you feel you can trust him or her, you’re usually right!
Bank Statement Proof of Funds Cash offers must be shown, not promised. There are ‘poser investors who claim to have cash to get you to sign a contract – and then lock you in a deal until they find a REAL BUYER! Ask for proof of funds letter from the investor. Honest investors will show the proof of funds to cover the purchase from. Watch out for “letters of credit”: a “letter of credit” means the buyer doesn’t have cash but rather is relying on someone else to pay for the property.
Social Media Presence & Website Every serious business has a website and social media accounts, such as Facebook, Twitter & Instagram. Companies with no online visibility could be hiding something.
Top Home Sales Solutions Property investors provide creative sale solutions, such as joint ventures, lending, brokerage, post-closing tenancy, and wholesaling. Real estate investors solve homeowners problems – and the biggest challenges require creative solutions. Professional cash buyers are skilled at purchasing property that can’t seem to sell. Here are a few ways investors can work with everyday home sellers:
Joint Venture / Syndication A homeowner and real estate investor can “partner” on sale. The investor provides money, experience, and management, and the homeowner brings the property. The works well where there is an “underwater” mortgage and renovation is needed to build equity. Homeowners also hire professional homebuyers to complete renovations since they are experienced with teams in place.
Brokerage Services Not all houses need a “fast cash sale.” Sellers often have houses in great shape and don’t mind waiting for top dollar. Real estate investors offer brokerage services (listing on the MLS) to help sell those properties to regular owner occupants.
Lending Real estate investors can use their cash in a few ways, including making a loan to rehab a house. If you started a rehab project and ran out of money, an investor can loan the remaining repairs to complete the project.
Staying Post Closing Homeowners can end up in a situation where it is necessary to sell but they either can’t or prefer not to move. Investors often buy houses and allow the prior owner stay on post-closing for free for a brief period, or long term as a tenant.
Wholesaling Wholesaling is when a real estate investor enters a purchase and sale agreement with you, and then reaches out to the investor’s buyer network to find a buyer that will own the property upon conclusion of the sale.
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