The thought of all the things you need to do to sell your home can be overwhelming. You might find yourself asking, “How do I start?”, “What does it cost?”, “What will I do with 40 years of stuff?”, “How will my home pass inspection?”, and “How do I get it show ready?” With all these concerns swirling around your head, it might be tempting to accept a cash offer from an investor who promises a quick and easy sale.
While the allure of a quick transaction might be appealing, it’s important to carefully weigh your options before making any decisions. One of the best ways to navigate this significant life choice is to consult a trusted local realtor who can guide you through the selling process and help you get the best value for your home. In this blog post, I’ll explore key reasons why you should meet with a realtor before selling your home to a cash investor.
The Predatory Nature of Some Cash Investors
Let me start by saying that a cash investor’s primary motivation is to maximize their profit on a transaction, which often conflicts with your goal of getting a fair deal. In other words, they may not have your best interest at heart. As a listing agent, I’ve seen this scenario play out more and more, especially with older sellers.
Last summer, I had an elderly client with whom I met to discuss selling their home. I provided him with an analysis of what I believed his home would sell for and what he would net after commissions and fees. The client agreed and signed a listing agreement with me.
However, just two days later, an investor approached the client and convinced them that they wouldn’t achieve the list price I recommended, and that after my fees they would make less. Interestingly, he assumed an 8% commission fee in his calculations, which was way off the mark. Using high-pressure sales tactics, the investor persuaded my client to sign with him.
Fortunately, the client’s family intervened and sought legal counsel, and he was able to get out of the contract. Long story short, we ended up selling the home “as is,” and the client walked away with about $100,000 more than he would have if he had sold to the investor, even after accounting for the extra lawyer fees.
The Importance of Comparative Market Analysis (CMA)
One of the essential services a realtor can provide is a Comparative Market Analysis (CMA). This analysis gives you a clearer idea of what your home is worth by considering similar properties in the area, recent sales, and current market trends.
As I mentioned before, a cash investor’s primary goal is to make as much money as possible so they will offer significantly less than the market value. Investors will often use the 70% rule, which means they will offer you 70% of the fair market value minus any expenses they will need to put in. So, for example, if your home is worth $400,000 and requires about $25,000 in repairs, they will offer you $255,000 ($400,000 home value* 70% = $280,000 – $25,000 repairs costs = $255,000).
If your home needs some TLC, I recommend asking the realtor to do a CMA assuming it won’t be “show ready.” Knowing the potential value of your home on the open market can help you decide whether selling to a cash investor is truly in your best interest or if listing it “as-is” might be more beneficial. Remember, you don’t have to make a home show ready to list it. Obviously, you won’t make as much money as a home that has been prepped but you will still most likely come out far ahead then if you were to sell to a cash investor.
Understanding Your Net Proceeds
Selling a home does involve various costs, including realtor fees and closing costs. A realtor can help you understand these expenses and provide you with an estimate of your net proceeds from the sale. By having them do this, they can help you evaluate whether a cash investor’s offer is fair compared to what you could earn on the open market.
The Closing Process Timeline
A key selling point for cash investors is the quick closing process. In the past, when closings would take 60 days, cash was much more appealing. But today, thanks to advancements in technology and improved processes, closings can often happen in under 30 days. A realtor can facilitate a smooth and efficient closing, which aligns with your timeline without compromising on the sale price. And, keep in mind, just because you list with a realtor, doesn’t mean you won’t necessarily get a cash offer. In fact, in today’s competitive market, we are seeing more and more cash offers.
Conclusion
Before selling your home to a cash investor, it’s wise to meet with a trusted realtor. A realtor can help you determine the value of your property, offer clarity on the costs associated with selling, help expedite the closing process, and offer valuable advice. By working with a realtor, you can make an informed decision that’s in your best interest.
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