You could believe you’ve died and gone to heaven if you’re selling your property and an investor walks in and offers you all cash. But think about it before you sign that purchasing agreement. Investors aren’t always as generous as they appear.
Individuals, couples, and families are the most common types of house buyers you’ll encounter. They may be looking for their “forever” home or a place to raise their young children, and they most likely view their home as an investment, but they aren’t investors.
Investors are individuals or businesses interested in purchasing your home in order to profit. As a result, talks will differ (and hopefully be easier) than if the buyer plans to live on your property. However, the investor(s)’ motive should sometimes be enough to make you think twice.
The Benefits of Selling to an Investor
Purchased as-is. Because the investor (or the corporation) will not be living in your home, it makes little difference if your kitchen has been redone with a vivid backsplash or if your toilets have been replaced. In fact, many investors seek for homes that are old or obsolete in order to renovate and resell them.
There’s a slim chance you won’t close due to a lack of finances. Because most investors pay cash for houses, you won’t have to worry about the risk of a buyer qualifying for a mortgage. Even if a buyer has been preapproved for a loan, the lender may determine that the buyer’s creditworthiness has changed and refuse to provide the funds required to purchase your house.
Before you sign a purchase agreement, you should request proof of cash from the investor. This might be evidenced by bank or money market account statements that show cash or liquid assets in excess of the home’s purchase price.
Faster closing. Because most investors pay cash, you can sell your home as soon as the two parties agree on the terms of the transaction. It takes two weeks on average for sellers to close with an all-cash buyer. It will take you at least 60 days to sell to a buyer who requires a mortgage.
Flexible buying options are possible. If your house is underwater or you want to get out of the real estate industry but don’t want to move, selling your house to an investor may be the best option. Some investors will offer to take over your mortgage and even rent the property back to you in a sale-leaseback agreement.
The Drawbacks of Selling to an Investor
You never know who is interested in purchasing your home. Investors are not obligated by law to disclose who or what is acquiring your home. So it may be a dishonest landlord or a developer who wants to demolish your home and transform it into apartments.
You may not be able to sell your home for its real market worth. The majority of investors seek out properties that are below market value. At the very least, at a discount. You may not know the true market value of your home since they are not required to tell you what they have planned for it, such as demolishing it to create lucrative apartments.
If an investor owns land adjacent to your house and intends to create a huge apartment or commercial complex, the investor would hypothetically be ready to pay more for your house than a family searching for a home. To properly negotiate, you’ll need a real estate agent that has experience selling to investors.
The cash buyer could be a con artist. Someone acting as a foreign or out-of-town buyer (or a real estate agent representing one) contacts the seller and claims the investor wants to close immediately. The investor is just interested in buying the house and never wants to view it. The investor will then forge a cashier’s check or have an inexperienced or unrepresented seller sign a purchase agreement with disadvantageous terms, and the seller will be cheated out of money before he or she realizes it. To avoid this, employ a real estate agent who is experienced in selling to investors.
If the cash buyer is a reputable foreign investor, the transaction may take significantly longer to complete than if the buyer is a local buyer who requires financing. Purchases of your home by non-US nationals may result in negative tax ramifications in their own country. As a result, the sale could be postponed for months while the investor sorts out the closing details.
It may sound too good to be true when a buyer offers to buy your house for cash and without asking for any of the repairs that a normal buyer would. And it’s possible. Before signing any purchase agreements, conduct your homework on the possible purchasers and seek advice from a real estate agent. You don’t want to lose thousands of dollars due to a lack of preparation or faith.
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