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How much less will I earn by selling to a home investor?
One of the top questions homeowners ask when considering selling to a homebuying company is: How much will an investor pay for my house?
As previously mentioned, a seller typically receives less money for their home when selling to an investor compared to a traditional homebuyer. Exactly how much less depends on the chosen investor, along with factors like the home’s condition, price point, and location.
For example, a buy-and-hold investor may make an offer close to the asking price because they can count on turning a profit through rental income and the property’s appreciation in value over time.
A flipper, on the other hand, doesn’t usually intend to hold onto a property very long. Rather, their goal is to get into the house quickly, make the needed repairs and renovations, and then put the house on the market for a profit.
They’ll also invest what could be a substantial amount of money into the house before selling it as a turnkey home. Their offer will reflect these repairs and renovations, as well as the profit they’ll need to make on the property for the job to be worth their time.
To reach this figure, flippers often use the 70% rule, which states that they should pay 70% of the home’s after-repair value (ARV).
If the house is a good candidate for an iBuyer sale, that often provides sellers with an offer that is closest to their asking price for the home, but note that these companies often prefer homes in better condition.
You don’t have to make all these decisions on your own, reassures top-selling Fort Worth real estate agent Chris Minteer, who says a good agent will be knowledgeable of these processes. “It’s our job to give guidance on what works best for their scenario and be able to point them in that direction.”
Should I sell to an investor or a typical homebuyer?
If you’re struggling to decide whether to sell to an investor or a traditional homebuyer, you’re not alone. Each option comes with its own pros and cons, making the choice even more challenging. To help you navigate this dilemma, we’ve broken down the key differences so you can make a more informed decision.
| Aspect | Selling to an Investor | Selling to a Typical Homebuyer |
| Fees | No real estate agent fees, fewer closing costs | Real estate agent commissions (3% to 6% of the home’s sale price), closing costs |
| Timeline | Quick (as little as 7 to 30 days) | Longer (30 to 120 days) |
| Property Condition | May be sold as is | Requires repairs, staging, and showings |
| Buyer Financing | Instant cash offers with few to no contingencies | May involve a mortgage contingency |
| Sale Certainty | High, since investors are motivated to buy and flip or rent out | Low, since buyers rely on loan approval |
| Final Sale Price | Often below market value since investors want to increase profit margins | At market value or above, especially when there’s tight competition among buyers |
Five questions to ask yourself before selling to an investor
With an understanding of who home investors are, as well as the benefits and downsides of working with them, your next thought might be: Is this the right move for me? Let’s cover a few questions that can help you decide.
1. How urgently do you need to sell your house?
If you need to quickly settle an estate, divide marital assets in a divorce, or relocate swiftly for a new job, you can’t always wait for the standard 42-day or longer closing window. Home investors are much more flexible with sales timelines than traditional homebuyers and can complete the entire process in a matter of days.
2. What is the condition of your property?
Just as you consider what typical homebuyers want when preparing your home, it’s equally important to ask, “What do investors look for when buying a house?”
When deciding whether a homebuying company might be interested in your home, keep the following in mind:
- Buy-and-hold investors are looking for single-family homes or condos in up-and-coming neighborhoods to rent out.
- Flippers prefer deals on “as-is” properties, often single-family homes, that they can renovate and sell quickly for a profit.
- iBuyers want homes in good condition.
Depending on your market, multiple types of investors might be interested. Minteer says that “the majority of the properties that we see going in the direction of an investor sale are the ones that need more love.”
