After selling homes for over 30
years, I am blessed to have a lot of past clients. Many are comfortable enough to ask me tough questions,
some which may hurt my livelihood, because they still trust me to give them a
straight answer. In the past year, I’d
say at least once a week, one of my past clients will call or email me telling me
that they received an email, text or piece of mail offering to buy their house
for cash. They ask me if this is legit. As with most questions the answer is, it
Local investors, investment
companies, real estate trusts and companies that rent homes are all looking for
inventory. As with most companies, they
are in it to make a profit, be it now or in the long term. There is certainly a place for these
companies but a seller must be aware of what they are getting into. Every seller has a unique reason for selling
as well as an expectation of how much effort they want to put into selling
their home. To many, it’s not about
getting the highest price or the time it takes to sell. Many people are willing to take less than
market value if the process is fast and easy.
Those sellers are the main targets for most of these offers.
There are many different types of these
offers on your home and I’ll try to explain a few of the different
categories. There are 5 categories: national
investment companies and trusts, local investors and national franchises, iBuyer
companies, and national rental companies.
Pretty much all of these companies will pay cash, which takes a lot of contingencies
out of the equation. That usually leads
to much quicker and “cleaner” closings.
National investment companies and
trusts will typically make an offer on the house at 40-70% of their perceived
fair market value. Generally, they make
the offer, stick with it, no negotiation, no inspections, as is, very neat and
clean but the price is much lower than market value.
Local investors and national
franchises will offer sellers an initial value of the house. In most cases they will then do an inspection
and will lower their offer, citing issues found during the inspection period. Many sellers will then wonder if they wasted
Opendoor, OfferPad and RedfinNow
are the most prominent iBuyers. Zillow
Offers used to be the leader in the iBuyers market but went out of business
late last year. Most iBuyers will come
to sellers with offers much closer to fair market value. Opendoor and OfferPad
will do an inspection and may renegotiate the price based on inspection, and will
close in about 2 weeks. They do charge a
fee that is typically 5%. RedfinNow is
not as competitive as it charges up to a 13% fee.
The advantage of selling your home
to these companies is that you do not have to prepare the house for sale or
have to worry about people coming through your house for showings. You receive cash at closing. While the process can be very quick, you do
have to give up keys at closing, so you better have a place to go.
With all of these options, why do
most homes still sell the traditional way?
Seller’s unease with the unknown of
these companies and the fear that they could get more money and better terms.
With traditional sales in the
current market, sellers have control over the process. Typically they can choose the type of offer,
whether the buyer is a cash buyer or will use conventional financing and what items
stay with the property. Many times
sellers can request post closing possession time in the home along with just
about anything else that is important to them.
The sellers call the shots.
Often times in a traditional sale the
first offer sellers receive, sometimes before showings even occur, will come
from a national home rental company such as American Homes 4 Rent. Very often it is a full price offer paying
cash. Sellers might think, what more
could we ask for?
Here is their dilemma. First, they
wonder if a weekend of showings could produce an even better offer. Next, many of my sellers tell me that they
don’t want to do that to their neighbors, thinking a renter and corporate owner
will not care for the property as well as an owner occupant. Whether true or not, that is their
perception. It’s worth noting that now
that national rentals companies are buying such a large inventory of homes, many
communities are amending their deed restrictions to not allow rentals or only
allow a certain number of rentals in a subdivision.
In my personal opinion, anyone
thinking of selling a home in this market of low inventory should expose their
house to the current market conditions and let the market decide the
value. Before considering any offers
from investors or iBuyers, call me. I
think most of you trust me enough to give you an honest opinion of what would
be best for your unique situation.
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