Selling a home off market to a real estate investor has become more popular than it used to be. Why, you might ask? Well, there are some advantages, depending on the condition of the home and the seller’s timeline and budget for repairs. In this post, we’ll take a brief look at what goes into a typical home sale, and why more people are opting to sell directly off market.
Selling on the MLS: The Budget
The Condition of the Home and Its Repairs and Updates
When most home owners begin to slow down and look around at the condition of a home they want to sell, it can be a little daunting! Things they’ve lived with for months (or even years!) come into clear view as needing to be repaired or replaced in order for them to feel confident about putting the home out for all to see on the market. That pesky leaky sink or shower faucet. The broken screen door. The threadbare carpet in the heavily trafficked areas. The scratched kitchen countertop. The deck that needs mending or re-staining. All of a sudden, their house repair list can become a page long. And a feeling of despair can sink in.
Many sellers have also heard the old adage about how they can often get a better price for the house if the kitchen and bathrooms are updated. Depending on how their condition and the current market, this may be a good idea. Although, there are other things that can also add some great value and boost the sales price. Meeting with a realtor to discuss the current market situation and the other types of homes you’ll be competing with is a good idea. Then you as the seller can make decisions about if and what to repair and update, and budget accordingly. Everything takes money it seems, especially when it comes to home improvement, so it’s wise to make a realistic list, budget, and time frame, and tackle things accordingly. Each task is very likely going to take both time and money, by you or someone you hire to do the work, so go into the sales process knowing this and try to keep any discouragement at bay!
Holding & Sales Costs and Agent Commission
Another set of costs come into play with traditional home sales, as sellers come to understand certain costs and commissions come out of the final sales price. Holding costs and closing costs both factor in to the final net profit on a house sale. Holding costs include things like property taxes, homeowners insurance, continuing utility bills, and maintenance … costs that you have to incur as you still “hold” the house until the sale closes and new owners take possession. And closing costs are another type of cost you need to remember in order to calculate more accurately how much you’ll actually make on the sale; the seller of the home usually pays somewhere around 2% of the final sales price toward the closing costs, which includes things like transfer taxes and title insurance fees, among other things.
Because real estate agents do important work to help market and sell properties, the seller pays a commission of usually 5-6% of the final sale price. Working with an agent can provide one of the best ways for you to get the best price possible for your home, especially in this current seller’s market. But some sellers (for various reasons) just don’t want to pay any commissions, so if this is a big issue for you, it’s best to consider selling the home yourself, or selling it directly to a professional home buyer. This type of investor will typically make a lower offer for your home, but they usually cover all the closing costs, which can add up.
MLS Sale – The Time Frame
When you hire an agent to help sell your home, they will shoulder a good portion of the effort that goes into marketing and selling the property. Even so, be prepared that the selling process will require some of your energy, too! For example, you’ll probably need to spend time…
- Making repairs and upgrades to the property before it hits the MLS (as discussed above)
- Working with your agent to market the property on the MLS and possibly elsewhere; staging for photography, helping with the descriptive write-up
- Keeping the property clean and ready to show at all times, as you just never know when the opportunity will arise for a last-minute viewing
- Vacating the property when someone comes to see it (this includes you and your pets!)
- Waiting for a qualified buyer to make a a good offer
- Reviewing offers and negotiating with potential buyers
- Waiting for the escrow process to be completed
- Dealing with inspectors and appraisers
Selling a home is an exciting prospect in so many ways, but it really isn’t for the faint of heart!
Speaking from our own experience, one of the most difficult parts of selling a house through the traditional MLS process is all the unknowns. Until you’ve actually closed and the deal is done, as the seller, you just don’t know if you’ll end up getting the asking price, or if your improvements will provide the returns you’d hoped for. And planning for the future can be hard during the sales process, because there really are significant unknowns like not know when the buyer will want to close or if they’re going to ask for significant repairs to be made before the sale is completed. For some, this period of uncertainty is really hard to take! If you’re someone who feels like this, selling directly to an investor, where there are at least fewer unknowns, may reduce some stress and simplify the whole sales process for you.
Selling Off-Market – The Budget
When you choose to sell your house “off market” directly to a professional home buying investor, the sale price won’t usually be as high as if it would have been, had you sold your property retail with an agent. That said, the amount you save can sometimes more than make up for it. Most direct buyers, including Anna Buys Houses buy houses as-is, which means they are happy to buy homes that for whatever reason, aren’t all fixed up or perfect necessarily. When you work with a professional home buyer, they are comfortable buying homes in all different sorts of conditions. They realize people have busy lives, and sometimes don’t have (or want to spend) the time and/or money to get a home in perfect condition to list on the MLS. With direct buyers, there are no repair costs for sellers to worry about. There are no commissions or closing costs to pay, because investors don’t typically charge fees and they offer to pay closing costs to help simplify the deal.
Off-Market – The Time Frame
In most cases, because many professional home buying investors use cash or have financing lined up in advance, the sale can close quickly in a matter of one to two weeks even. This can potentially save sellers thousands of dollars in holding costs because they don’t have to continue to pay another month’s mortgage, all the utilities, etc. Many direct buyers even allow sellers to simply pack up and take the furniture and belongings they wish to keep. So they don’t have to worry about hiring packers or movers, or even cleaning the house out before closing. Investors usually have work crews to help them handle these things. Or they don’t mind doing them themselves. Working with a company like Anna Buys Houses in the Omaha, Nebraska area can help you save time in selling your home; our goal is to keep things simple and direct, hopefully offering sellers the peace of mind that comes with convenience and a fair market price on the home.
Using a real estate agent in the sale of your home can definitely be a positive experience and attract the highest offers. But if you find yourself in a challenging situation with a home that needs a lot of repairs or updating, and you simply don’t have the time, energy or money to prepare it for the MLS, keep in mind you can still sell your home to a direct buyer. This type of sale makes sense for different people at different times. We are simply honored to have the opportunity to share information about the direct sale process.
The Unknown Becomes a Little More Known
One thing about selling “off market” to a direct buyer. You may actually have a clearer sense of what’s going to happen during the sales process itself, as well as a more immediate, clear sense about what you will make on the sale. Many investors are like us … we do our best to keep the sales process simple; we appreciate coming to take a look at the property, and visiting with you about it for a few minutes; then usually within a day or two, we can tell you what our offer is for the property. And, because we have cash to use or have financing set up in advance, we can close on the sale quickly and whenever is most convenient for you. So in many ways there is quite a bit more certainty for the seller regarding the process and the outcome. Selling to an investor can make a lot of sense when time is of the essence, or when repairs and updates are simply too daunting. If you have any questions about the process of selling to a direct home buyer, we hope you get in touch with us.