Sell My House to an Investor or Through a Real Estate Agent?
Updated: May 11, 2020
So you are going to sell your house but you haven't decided yet if you want to go with the traditional realtor method or just call an investor. There are advantages each way and the best approach for you depends on your unique situation.
Let's start with the traditional method to sell your house with the help of a real estate agent. First of all, which agent will you choose to work with? Everyone these days "knows someone". We all have a friend or a relative that is a real estate agent and everyone we meet is eager to push you towards their friend and tell you how good they are or that they can cut you a deal. That is both good and bad. If you truly know a great real estate agent then you're lucky. Most people however know an agent who is maybe a great person and a good friend but is not exactly a real estate rock star. In fact the vast majority of real estate agents are lucky if they sell a handful of properties in a year. If you are going to go with an agent, make sure you do your research to find a high performer who will be able to sell your house quickly and at the best price. You will want someone who is deeply familiar with your housing area, has plenty of listings under their belt and has good reviews. Make sure you feel as though you can communicate effectively and openly. A good agent will be on your team to get you top dollar for your house while still making sure you are at the price point to sell quickly based on your area and current market conditions.
On the downside, when you sell your house with an agent there are a few things that are not so appreciated no matter how great your agent may be. First of all, it is not always convenient to keep your house show ready and live in it at the same time. Traditionally, your agent would hold an open house to get traffic and potential buyers to have a look. This means your house has to make a great first impression. In preparation for this you may need to not only clean and organize but you may need to remove your collections of "stuff" to temporary storage somewhere and possibly even bring in other "stuff" as staging. Also, now that your house is clean and pretty, you need to keep it that way for when buyers agents want to bring their clients through and you will likely be asked to be absent while they are viewing. Add to this inconvenience the new normal we are finding because of recent events and bringing strangers through your home might just not be an option. How then will possible buyers see your house?
Also on the thought of impressions, you will want to make sure any repairs that you have been putting off or that you decided you could just live with are actually taken care of. The last thing a potential buyer wants is a list of problems and repairs that they will need to take care of in their new home. At best, they will make a laundry list with their realtor of all the repairs they want done and use that as a bargaining chip against your sale price. At worst, they will just lose interest in the house altogether.
Lastly for the case of selling through an agent, you will most likely have to wait at least six weeks for closing after already having waited for a buyer to sign a contract. Nearly every house shopper looking for their next home is going to pay for that home with a loan, a.k.a. financing. Getting financing through the banks, take time. That's just how it is. If you are in a situation where speed is of the essence, six weeks is an eternity.
Now I think it is fair to note that I do not count the real estate agent's commission as either a pro or a con as many other investors will do. At closing 6% of the sale price of the home is typically paid as a commission which will be split between the buyer's and the seller's agent. This creates some heartache because it seems like a lot of money but hopefully they earned that commission by negotiating a good price for your house. An investor is going to make a profit from buying your house as well. Otherwise, they wouldn't be an investor. The difference however could be summarized that the agent's fee is made up front while the investor's profit is made some day in the future only if they do a good job and made a wise investment. Just remember that when you receive an offer through a realtor, you are going to lose some of your "profit" to realtor commissions and when you receive an offer from an investor, it is a bit more straight forward.
Let's take a look now at the pros and cons of selling to an investor. First of all, investors sometimes get a bad rap because a lot are not particularly well trained or experienced so they just know that if they ask enough people, someone will eventually sell them a house. This leads to the supremely frustrating situation where they realize at the last minute they are about to bite off more than they can chew and end up lowering their offer or backing out right before they were scheduled to close. To make matters worse, there are some big name companies in the real estate industry that seem to have made last minute renegotiating their default strategy. They are counting on the fact that many sellers will give in to their demands rather than go through the frustration of finding a different buyer. To avoid this, make sure you work with an investor who has been in business at least a couple years, has positive reviews and feedback, and who is able to communicate with you clearly on all points of their buying process.
The biggest perceived downside to selling to an investor is the discounted price that the investor is able to offer but there is a reason for their limited offer. It's not greed and opportunism. The nature of being an investment means there needs to be potential for profit. An offer from an investor should account for the expenses they know as well as as some room for profit. The profit for an investor is never a known quantity because it includes the risk that things do not go as planned. For example, if fixing that drip under the sink turns into replacing all the house plumbing or if the market shifts during repairs so that the finished house takes longer to sell, these are potentially very expensive surprises that can easily turn an investment from a profit to a loss. So when you get an offer from an investor keep in mind, they will pay the closing costs for your sale plus, they are going to pay all the expenses of repairing everything, pay the holding costs during that repair and resale period, and ultimately pay the realtor commissions at resale. All significant expenses in money and time that you can walk away from smiling.
Now, the biggest motivation to sell your house to an investor might be, as we mentioned above, you can completely ignore whatever repairs and problems may exist. Those holes in the wall from when the kids decided play baseball in their bedroom? No problem. The carpet that used to be white but is now brown? Don't worry about it. Been experiencing electrical problems but have not figured out why? No longer your problem. In purchasing your home, an investor is assuming responsibility for all these problems.
Another big advantage of house investors is they typically offer to make a cash purchase rather than financing. At first, you may ask, "Why does it matter? I get paid either way." Keep in mind though cash is fast. An investor who can pay cash can close in a matter of days instead of weeks. An experienced investor will also have developed a network of private or hard money lenders in addition to having their own personal funds. This means they do not have to seek approval from a bank, ever. If you find yourself in a time sensitive situation and need to sell your house quickly a cash buyer can be a life saver.
So in summary, real estate agents and investors both provide valuable services and the benefits of each will shine in different circumstances. If you are getting ready to sell your house, I hope this will give some helpful food for thought and I wish you the best possible outcome.
If you are reading this and your property is in Texas, we would be thrilled to work with you. We are established in the Houston area as house buyers. We work with literally award winning realtors and we have a robust network of great people to work with all across Texas. Find us at SpaceCityHouseBuyers.com or give a call at 346-702-4040.