How Selling Your House To A Real Estate Investor Compares to your other options
Pros, cons, costs, and timeline of each option
Selling your house in todays market can be frustrating at times. With so many other houses on the market right now it gives buyers the upper hand because they have a lot more choices. Often times sellers can have there property on the market for 3, 6, or 9+ months waiting for their property to sell at a price they feel is fair.
This is a quick overview of the decision making process to help you decide what’s best for you and your situation. Should you go the traditional route and work with a real estate agent, try to sell the property yourself (For Sale By Owner), or work with a real estate investment company?
Each of these strategies have different pros and cons and each one will help you reach a different goal. It’s for you to really examine and see what you need to accomplish with the sale of your house and then make an educated decision that helps you accomplish those goals.
The 3 Options For Selling Your House
There are 3 real options for you when selling your Washington DC area house. Below is an in-depth review of those 3 options. We are looking at the drawbacks of each, as well as which option is really going to help you the most.
1) Working With A Real Estate Agent
This is the most popular way to sell your Washington DC house today. The general process of working with an agent is:
1. You contact an agent and they visit with you about your house to determine what they feel it may sell for.
2. You sign a listing agreement with the agent (usually at least 6 months) where they exclusively represent you in the sell of your property.
3. Agent lists property on the MLS, markets the property, and takes buyers through your house for showings (a house should be in tip-top condition so it can sell at a high price).
4. If a property sells, the agent takes care of the paperwork and negotiation with the buyer and the agent collects their fee, which is usually 3% for them and 3% to the agent that brought the buyer (so up to 6% of the total purchase price of the house).
Agents know the market and have direct access to the MLS which is the main way houses are listed when selling the traditional route.
Cost: Agent fees total 6% of the purchase price. As an example, if your house sells for $400,000… you could expect approx. $24,000 of that to be paid to the agents at closing.
Timeline: From 3 – 9 months (with an average of 6 months in many markets) But it really depends on where you are located in the greater Washington DC area.
Pros: Agents know the market well, have access to the MLS to list your house to expose it to a broad spectrum of retail buyers. Agents take care of the marketing, showing the property, and putting together the closing documents.
Cons: It can be expensive. Not only is the agents’ commissions paid out of the proceeds of the sale at closing. Also the seller has the expense of getting the property in tip-top shape (meaning making any repairs and “modernizing” the property so it can sell at a premium to a retail buyer.
Also, a lot of agents tend to go to through the “traditional” route of marketing which often takes 3-9+ months to sell a house (again it depends on the location of your property in the Washington DC area).
So, while the house is sitting on the market, you are responsible for the costs of the house while it’s trying to sell.
Lastly, when selling to the traditional way with an agent to a retail buyer there is always the chance that the buyer who’s offer you’ve accepted has their financing fall through, or delay the closing date and it is not uncommon for many retail buyers to ask you as the seller to pay for part of the closing costs.
Working With An Agent Is For…:
People who: aren’t pressed for time and can wait 3-9+ months to sell their Washington DC area house; have room in the transaction to pay for fixing up the property, pay the agent fees and holding costs; and are looking for full market value.
2) Selling Your House Yourself (FSBO)
In the last 15 years “For Sale By Owner” has become very popular with home owners now having access to the internet. Sites like postlets.com, forsalebyowner.com, craigslist.org, and zillow, it makes it easy to list a house online.
The general process of selling a house on your own is…
1. You determine the value of your home. Determining the value of your own property is a very tricky process. There are resources out there. Some pay for an appraisal, some look at the tax value and some home owners ask a real estate agent who may be willing to give them a value.
2. Take pictures of the house and gather all of the details about the property (such as sq. footage, etc.), and create a listing on a FSBO website. Also, put a FSBO sign up in your yard.
3. Then, you, the house owner need to market your Washington DC area property. Many people list in the newspaper, online, and there are even “flat rate” MLS services out there where you can get your house on the MLS for under $500 (I’ve recently seen ads for the service on craigslist for $100).
4. You handle offers, showings, and putting together the paperwork for the sale.
5. You and the buyer show up at the closing table and complete the purchase.
Cost: The only real costs are whatever fees there are to list on a FSBO site (between $100 – $1000), if you choose to get it listed on the MLS with a flat fee agent (about $100 – $500), any cost to fix your house up so it shows well, and potential closing costs that you may share with the buyer. Plus, if you decide to pay a buyers agent fee (usually about 3%) to entice agents to bring their buyers to see your house. Again, on a $400,000 house (an average price of an house in the greater Washington DC area)… 3% is about $12,000. Plus the other costs above and that is about $5,000 – $8,000.
Timeline: This really depends on your ability to market the property. Usually FSBO houses stay on the market longer than the 3-9+ months it would if you had listed it with an agent. You should budget 6-12 months to sell with this strategy in most markets (again this depends on your location within the greater Washington DC area).
Pros: You can save a significant amount of money by not paying agent fees. You also have control and full responsibility over the whole process.
Cons: It take a lot of work to sell your own Washington DC area house. Also, if you’re not comfortable and experienced in the process of selling a house, the paperwork, and valuing your house, you could find yourself in over your head and it could end up costing you more than working with an agent. The largest drawback with going the FSBO route is the amount of time it could take to sell your Washington DC area house.
Who is FSBO For:
Selling your own house is an awesome option for those who don’t need to sell quickly. Also, people who have a certain comfort level with negotiations succeed with this option. If you need to sell quickly and/or don’t want to hassle with everything that goes with listing and selling your house yourself then this isn’t the route for you to sell your Washington DC area property.
3) Selling Your House To A Real Estate Investor:
A third option for selling your house is to work with a real estate investor who buys houses. In the greater Washington DC area there are real estate investors who buy properties and either: fix them up and sell them, hold onto them as a rental property, or sell them to other real estate investors who will hold them as rental properties.
The general process of selling your house to a real estate investor is…
1. You connect with the investor and submit your information about your house and situation to them.
2. An investor will evaluate the house, come up with a value for it, determine if any repairs are needed and factor those into the their offer, find out what your goals are, and make an offer that fits their buying criteria and helps you reach your goals.
3. You look at the investor’s offer and decide if it works for you.
4. If it’s a fit, closing happens at a title company and the title company prepares the documents… the investor buys with all cash so it’s a quick close and you get your cash quickly.
5. The house sale is complete.
The process can take from 5-30 days, a lot of investors can close within 7-10 days if you need it to. This is the option that many Washington DC area house sellers go with when they need to sell their house fast with little hassle.
Cost: The cost to sell your house to a real estate investor is very low. There are no commissions or fees and often times the investor will actually pay for 100% of the closing costs as well. This eliminates thousands in costs that you would have to pay when working with an agent or selling the FSBO route.
The primary cost with working with a real estate investor is the fact that an investor can’t pay full retail value for a house. However, for many sellers, selling at a lower price makes sense in return for the elimination of commissions and fees, repairs, updating costs, and the holding costs associated with selling your Washington DC area house.
What many people don’t take into consideration are the “holding or carrying costs” when selling a house with an agent or the FSBO option. Holding costs are all of the costs associated with owning and maintaining the house. The mortgage payment, taxes, insurance, utilities, HOA fees, etc. These costs can really add up over the time of 3-9+ months. If your mortgage payment (including taxes and insurance) is $2,500 and you work with an agent and it takes them 8 months to sell the house at full market value… that means during the 8 months you paid $20,000 in payments on that house and we all know the majority of your mortgage payment is interest going straight to the bank. Plus, you’ll be paying the commissions and fees. So in the end, you could net in your pocket less if it takes a long time to sell your Washington DC area house with an agent for full retail value versus selling very quickly to an investor at a discounted rate.
Timeline: The timeline to sell your house to a real estate investor can be very quick. Since investors buy with all cash, and not through a bank financing, they can close very quickly. Many times you can have an offer on your house in less than 48 hours and can close in 7 days from the time you accept the offer.
Pros: Selling your house to an investor is less of a hassle, you can have your house sold this time next week if you wanted to, no fees or commissions, many times the investor will pay all closing costs as well, and the closing happens at a title company just like with an agent. The title company makes sure everything is handled correctly. In addition, almost all investors will buy your house “as-is” and won’t require you to repair anything, clean anything, or even remove everything from the house that you do not want.
Cons: There are drawbacks to selling with to a real estate investor. The main drawback may be that you are selling your property at a discount in return for the speed and convenience that a real estate investor is able to offer. If you’re able to work with an agent and the agent is able to sell your house for full market value within 3 months and you do not have a problem waiting 3 months then you may be better off going that route. But, if it takes longer than 3 months for the agent to sell your Washington DC area property then the “carrying” costs we mentioned earlier will start to eat away at any gains you may have had working with an agent.
Who Selling To A Real Estate Investor Is For:
This strategy is mainly for people who are willing to sacrifice a bit on the sales price in exchange for a fast, convenient, hassle-free sale. If you need to sell quickly (days or weeks rather than months), investors can close quickly. If you don’t want to mess with repair, updating the house or cleaning up the house, investors actually will take care of that for you. Investors are able to get a good house at a fair price that leaves them room for a profit.
THE OPTION AS TO WHICH ROUTE TO TAKE IS YOUR! AGENT? FSBO? Real Estate Investor?
PS – If you’re still not sure what option is right for you… use this quick little test. Can you wait 3 months to sell your house? If the answer is no or “I’m not sure”, contact us and we’ll give you a no obligation offer on your home. Take our offer, look it over, and take your time to decide. There’s no pressure. If you believe that it will help you reach your goals then great. We can close quickly, with no fees, and no commissions and we’ll even pay ALL closing costs. You have nothing to lose.