The Differences Between Selling Your House To An Investor And Selling Traditionally

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Pros, cons, costs, and timeline of each option

Need to sell your house? Selling in today’s market can be a little challenging. With increasing supply, buyers have more and more options, and often times sellers will wait 6-12 months to sell their house for a fair price.

This is a short walk-through that explains the best and most common options out there for you. So which way to choose? The traditional way when you list your house with a realtor, For Sale By Owner, or you can also work with an investor which will most likely buy your house for cash, and relatively fast.

Each strategy has it’s own advantages and disadvantages but it’s key to remember that each of them offers a solution for a different problem. As a seller, you need to decide what exactly it is you are looking to achieve by selling your property because then you can figure out the best route for you. biggerequity

Main 3 Routes To Sell Your House.

So there are 3 main ways in which you can sell your house. I’ll give detailed explanations regarding each one of them so that you can make the right decision for you. I am also going to explain the disadvantages of each and instruct towards the best option for you.

1) Using A Real Estate Agent

This is by far the most common way. Working with a real estate agent most likely is going to look like this:
You set up an appointment with a real estate agent and they’ll come over and determine the price they think it’s going to sell for.
If you are impressed with the agent and want to move on you’d almost always have to sign an “ exclusive right of sale” listing contract with them typically for 6 months.
The agent is going to list your house at the MLS and show your house to potential buyers.
If the agent located a ready and willing buyer, he would also take care of all the paperwork. The agent is getting paid on commissions, usually 6% of the purchase price.

Cost & Timeline

Cost: The total commission is almost always 6%. It is important to understand that the commission splits between your agent (the agent who listed the house) and the buyer’s agent (the agent that brought the buyer and represented him in the transaction). It’s important to remember that even though the buyer has it’s own agent, you are the one who is paying for his services traditionally. As an example, if your house sells for $200,000…you could expect an approx.
$12,000 of that to be paid to the agents at closing
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Timeline: Usually 4 – 12 months (average is 6 months in most real estate markets)

Pros & Cons

biggerPros: It’s safe to say agents know the market well. Agents also have access to the MLS so they can list your house, therefore, you can get full exposure. Another big advantage is that they take care of the entire sale process for you – from showings to paperwork and marketing.

biggerCons: It is very expensive. Remember that the agent’s commission is paid directly from the proceeds of the sale. Most agents will usually market the house in traditional channels which means it will take a lot of time to sell: 4-12 months. This means that you are paying also for all the known costs homeowners have for the entire duration of the sale ( property tax, insurance, utility bills, etc’ ).

The most important disadvantage is that real estate agents almost always market the house to the end buyer – the person who is going to live in the house. End buyers can negotiate for months, see the house multiple times before making a decision, and during that time they are waiting for the bank to approve their mortgage ( because most people who are going to live in the house wouldn’t be able or even want to pay cash for such purchase, and will need the bank). It is very often for the bank to deny the mortgage application of your buyer after months of waiting – wasting your precious time.

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So Who Exactly Working With An Agent Is For:

People that: are not in a hurry. If you are not on a time crunch and can afford to wait 6-12 months this is probably the best option for you. Make sure the price you set up with the agent covers his commission so you actually get what you want ultimately.

2) Selling the house your self – FSBO

For Sale By Owner is increasingly gaining popularity with the rise of the information age. A lot of homeowners feel like they are pretty good with the internet and can get a hold of a buyer using online marketing techniques. There are many websites like forsalebyowner.com, craigslist.org, etc’. Is Became so easy to simply list your house yourself without paying somebody else. Of course, you can’t really talk about FSBO without mentioning the neverending FSBO yard signs. This technique worked for years and will keep working in the future!

The process of selling your house on your own usually looks like this:

You decide what’s the price. It’s not always easy but there are many ways to find out what’s the right price. I recommend paying a certified appraiser for 2 reasons: A. It’s going to be the most accurate way of knowing the right sale price ( a lot better than a realtor )
B. you can always use it when you have a buyer. If they try to get a discount or lower your price, simply show them the appraisal report and they won’t be able to argue and claim that your house isn’t worth the asking price.

Take as many pictures as you can. Also gather all the information required ( like Square foot, rooms, baths, etc.. ) make sure to place a For Sale By Owner sign on your yard with your name and phone number. You’d be surprised how effective these signs are.
Market the house in as many ways possible. You can put an ad online and even in the local newspaper. Many people use Facebook campaigns too nowadays – they are cheap and pretty effective. Prepare to handle all the offers you receive and all showings. Meet your buyer at the closing table at a closing date to successfully complete the transaction.

Cost & Timeline

Cost:A. FSBO sites are going to cost roughly 200$-800$
B.You can also find services that offer MLS flat listing rates that will cost about 200$-500$.
C. you are going to pay the traditional closing costs sellers have – about 1-1.5% of the sale price (depending on your county).
D. Another option is to pay only a buyer’s agent commissions so that you attract agents that have potential buyers and this way you pay only half of the commission (3%).

Timeline: FSBO can take a week a month and even a year. It really depends on your marketing ability and determination to sell the house yourself.

Pros & Cons

biggerequityPros: there is definitely a lot of money to be saved selling your house yourself.

 

biggerequityCons: It’s going to require a lot of effort, energy and determination to do it yourself. If you are a very busy individual perhaps it’s best to put your energy into your work or other things that make money for you.

Who The FSBO Route Is For

FSBO is great for people who are not in a rush to sell their house and also have the nerves and endurance to go through the process all by themselves. Also, you’d have to have some sort of negotiation skills and the ability to sort through offers and paperwork. If you need to sell your house fast and don’t have time and energy to wait then this wouldn’t be the best choice for you.

3) Selling Your House To A Real Estate Investor:

The last option is to sell your house to a local real estate investor. No matter where you live, I can promise that there are real estate investors in your area that are buying houses for cash and flipping them or keeping them for investment purposes.

Here is how this process is going to look generally:

Locate a LOCAL real estate investor in your area usually using the web, and submit your information- the investor will then get back to you and tell you how he\she is able to help you.

The investor is going to try and understand your situation so that they can best determine what’s the best solution for you. Also, the investor is going to gather all the information about your property so that they can come up with a solid offer that they are willing to pay for it.  

Check the offer given to you from the investor.
If you and the investor reached an agreement, the investor is going to use a title company to oversee the transaction and make sure it all goes according to the contract. Investors always pay cash which means you can sell your property in as little as few days.

The transaction will be complete and the sale process will be over.
This process will usually take 7-30 days. It is by far the best option for you if you need to sell your house fast for any reason you can think about.

Cost & Timeline

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Cost: The cost is negligible. Usually, the investor will pay all closing costs and since there aren’t any finance or real estate agents the costs come up to about 1% of the sale price and even less.

The main cost when choosing to work with an investor is that the investor is not going to be able to pay market value for your house, but a little bit less so that he can make a profit. So the investor will usually look to buy houses at a discount but it’s pretty much worth it if your property is distressed or if you need to sell fast because you would sell at a discount anyway if it’s distressed and holding the property also costs a lot of money so the discount is there but you save time and time is money. For most people, selling at a lower price is worth it when they don’t have to wait a lot of time, pay property tax, insurance, and real estate agents commissions.

For example:

You own a property that you want to sell for 200,000$. The yearly taxes are 2,000. The insurance is 2000, and maintenance is another 2000$ a year.
Let’s also assume that you have repairs in the value of 5,000.
If you sell with an agent you’d have the carrying costs of the house as it’s listed on the market. So, if your house only sold after a year you’d be paying 6000$ in expenses + 5000 in repairs. You would also pay the real estate agent 6% of the sale price which would be another 12,000.
This means that you would net 200,000 minus 12,000 minus 6000 minus 5000 equals to 177,000$
An investor is going to be able to pay that amount or close to it and you wouldn’t have to wait for a year.

Timeline: The timeline is very quick because the investor also wants to buy the house so that he can start working on it and make money. So it’s in both parties interest that the property sells fast. It can take anywhere from 7-30 days – most times it’s the sellers that need more time to make moving arrangements if they are occupying the property.

Pros & Cons

biggerequityPros: It’s fast, very fast. It’s very easy. Investors are experienced in buying properties and can finish the process in a very easy and unstressful way. It’s certain. An investor will buy the property because he is trying to make a living out of it so it’s as important to him as it’s important to you.  

biggerCons: The main drawback is that the investor will look for a discount and it’s reasonable as he is trying to make money and there is no reason for him to do all the hard work if there isn’t dollar amount to be made at the end of the road.
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So who exactly is it for?

This strategy is mostly for people who are ok with selling their property at a discount and avoiding the hassle and the hard work around it. It’s for people who simply want to be done with it. Also this option is great for people who are in need to sell their house fast like people that are going through foreclosure or a difficult and expensive medical treatment, etc… If you need to sell fast then this is by far the best option for you. If you don’t want to worry your mind around repairs or cleanups then this will also be the best route.

Conclusion

There aren’t solution that are ocular or unique to one situation. In general – if you are not in a rush to sell and you can afford to wait – try to go with the FSBO route first or even listing with a real estate agent. If things don’t go well you can always call the investor and have him buy your house for cash.

However if you need or want to sell fast…. For example if you are in a pre-foreclosure, or you just inherited a property in FL while you are living in NY and can’t travel and do all the work, or maybe if you got a job out of state and have to relocate in a matter of a few weeks – working with an investor will be the best choice for you without a doubt. Some people for example really want to buy a new home that they like and they buy it even before they sold their previous home because of buyer’s competition or any other reason,, and now they are stuck with 2 mortgage payments they can’t handle – an investor will come in handy. This is because he has the ability to buy fast and release the burden from the homeowner’s shoulders.

Make sure that the transaction with the investor is taking place in a reputable title company. The big majority of investors are hard-working men and women who are good people and they help homeowners in difficult situations on a daily basis. Make sure the investor you are working with is one of these people and that he is trustworthy.

A word from us…

If you have any questions after reading this guide feel free to give us a call or submit the form on our website and we will get back to you in less than 24 hours with a free consultation for the best solution for your situation. We are local to South FL and we know the market very well. We could always share a free tip or advice because we believe this it the right way of doing business… whether we buy your house or not, we are on your side.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][/vc_column][/vc_row]

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