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What To Know About Selling Your House To An Investor

Jaclyn Ermoyan September 8, 2023

You’ve likely seen signs around your neighborhood that say things like, “We pay CASH for houses” or “Sell your house QUICK.” If you call the phone number listed on these signs, you’ll get connected to an investor.

An investor may also reach out if you’ve put your house on the market and they’re interested in buying it. So, what exactly is an investor and what can you do to protect yourself if you decide to sell your home to them? Read on to find out.

What Does A Home Investor Do?

Row of nice homes on a street, all of them for sale

Home investors are individuals or companies that purchase homes with the intent to make money. After buying a home, home investors may rent out the home for a steady income, renovate the home and sell it for a profit, or hold the home and sell at a later date when the market picks up.

How Do Investors Differ From Traditional Buyers?

A traditional buyer is someone who is interested in your home because they think it’s a great place for their family to live in or vacation at. When they make an offer, the offer will be based on how much they value your home and what they believe the fair market value is.

If they are very serious about your home and the market is hot, they may even make an offer that is above market value. A traditional buyer believes your home will benefit themselves and their family and is not typically thinking about how they can make money off the house.

Home investors aren’t picturing themselves and their families in your home. Instead, they’re thinking about how they can buy your home at the cheapest price possible so they can eventually profit from it.

Why Sell Your Home To An Investor?

The most noteworthy benefit of selling to an investor is that you can quickly get your home off the market without any hassles. Since an investor will likely buy your home in its as-is condition, you won’t have to worry about replacing the roof, fixing the furnace or repairing the leaky faucet that you’ve watched drip for the last 5 years.

Other benefits of selling your home to an investor include a quicker close and little risk of the deal falling through due to lack of funds from the buyer. Most investors will purchase homes in cash so once you agree on a purchase price, it usually only takes about 2 weeks to close the sale. It can take a few months to sell your house to a traditional buyer who’s taking out a mortgage.

What Should You Be Wary Of When Selling To An Investor?

When you sell your home to an investor, you get an all cash deal and quick close without having to make any repairs. So, what’s the catch? The reality is that the investor is buying your home to make money so they’ll almost always attempt to buy it at below market value.

In addition, investor scams are quite common. Before selling your home to an investor, research the individual or company online, read reviews, check with your local Better Business Bureau and consult your real estate agent to find out more about the investor.

What Happens When You Sell Your House For A Profit?

If you sell your home for more than you owe on your mortgage, you’ll make a profit. However, keep in mind that you may not keep the entire amount. If you’ve used a real estate agent, you can expect to dish out a commission that will likely be between 5% to 6% of the sale price.

You’ll also likely have to pay some closing costs unless, of course, the investor has agreed to take care of all of them. If you do have to pay closing costs, they’ll be between 1% to 3% of the purchase price. Also, don’t forget about remaining property taxes, which you may owe as well.

Closing Thoughts

If you have a home that needs some serious TLC or are looking to make a quick sale and are okay with getting below market value, you may consider selling to an investor. In the event you have a nice home in a highly desirable location and you don’t mind it sitting on the market for a bit so you can find the right buyer at the right price, you may be better off selling to a conventional buyer.