Selling your home to a real estate investor allows you to streamline the listing process and move out in less time. But if you’re considering this route, you probably have one very important question: How much will an investor pay for my house?
What Is a Real Estate Investor?
A real estate investor is an entrepreneur who pays cash for houses. They may hold on to the house and use it as a passive income source (such as by renting it out to tenants), or they may resell it at a profit.
The nice thing about selling to a real estate investor is that the process is quick and you receive a lump sum payment. You don’t need to list the house with a real estate agent and sacrifice 6 to 10 percent of your sale to commission fees. There are no lenders to negotiate with, and you don’t have to jump through all of the legal hoops associated with traditional real estate transactions. You just accept the offer, receive your payment, and hand over the deed.
There is one catch: When you sell to a real estate investor, you’ll typically earn less than the current market value of your home. Buying homes below market is what allows home investors to turn a profit.
But exactly how much value are you sacrificing when you sell to a real estate investor? It depends.
How Much Do Investors Pay for Houses?
Home investors will typically give you between 50 and 85 percent of your home’s market value. The industry average is about 65 percent. How much you can expect to earn depends on:
- The desirability of your home (value, neighborhood, scarcity)
- The condition of your home
- The type of investor you work with
There are three main types of real estate investors: iBuyers, house flippers, and buy-and-hold investors. In order to estimate how much you might earn for your home, you have to know what kind of investor you’re working with.
An iBuyer will usually give you the most money for your house, often in the 80-percent range or above. So for a $300,000 home, it’s possible to secure between $240,000 and $255,000 (though it’s by no means guaranteed).
The iBuyer business model is fairly new, but it’s becoming extremely popular. The buyer uses sophisticated computer algorithms to locate houses with profit potential. The buyer purchases the homes near market value but then generates a profit by collecting real estate commissions—similar to the fees that a real estate agent would take. The buyer generates revenue by purchasing and selling high volumes of real estate.
But while an iBuyer may be the most lucrative investor to sell to, not every homeowner is so fortunate. These buyers are very selective, and they typically look for desirable homes in pristine condition.
A house flipper will usually give you the lowest amount for your home, as their income is based on their ability to resell the house at a significant profit. This type of investor will typically offer you between 50 and 65 percent of your home’s value.
So if your home is valued at $250,000 and requires $50,000 worth of repairs, you might stand to earn close to $130,000 for an all-cash sale. The investor will usually subtract the cost of the necessary repairs and calculate the percentage based on the after-repair value (ARV) of the home.
A house flipper capitalizes on lower-value homes with improvement potential. They love fixer-uppers as well as average homes that can be modernized. They bring the home up to code, upgrade the interior and exterior features, and then resell the property based on its improved property value.
If other home investors have turned you away, a house flipper will usually be happy to make you an offer. You may earn a bit less, but you no longer have to worry about trying to restore a home that’s in disrepair.
A buy-and-hold investor will usually pay you more than a house flipper but less than an iBuyer, so you might expect to earn somewhere in the 60-to-75-percent range. For a $300,000 home, that might net you between $180,000 and $225,000. Again, these are just ballpark figures.
A typical buy-and-hold investor will purchase homes in bulk and transform them into rental properties. By collecting monthly rent from tenants, they can earn back their investment in time without limiting their long-term profit potential.
This type of investor will typically pay more than a house flipper because their potential revenue isn’t limited to a one-time sale and—like iBuyers—they tend to prefer properties that are somewhat in demand. However, they’re not quite as selective as iBuyers because they can still turn a profit on a less-than-perfect home.
When Will Investors Be Willing to Pay More for a Property?
If you want to ensure the maximum payout from a real estate investor:
- Know your home’s value. Even if you expect to take a loss on the home, you still need to know the fair market value up front. Don’t simply take the investor’s word for it, as you might get taken advantage of. Opt for a third-party appraisal if possible.
- Take care of any necessary repairs. If you’re selling the home because you don’t want to deal with repairs and upgrades, you can skip this step. However, if your goal is to earn as close to fair market value as possible, you’ll need to get your home up to code and in model condition. The more damage you have, the less negotiating power you have.
- Spruce up your curb appeal. Even if your home is in good shape, you might be able to secure a higher offer by making some simple visual improvements: a new coat of interior and exterior paint, some upgraded landscaping, a professional top-to-bottom cleaning. Even small improvements can make a significant difference for your bottom line.
- Get a second opinion. If you receive a disappointing offer from a real estate investor, you’re under no obligation to accept it. You can always reach out to other investors and determine if you can net more money elsewhere.
When it comes to securing the maximum value, selling to an investor isn’t much different from selling to a traditional buyer. You just need to make the home as desirable as possible.
Is Selling Your Home to an Investor a Good Idea?
Once you have the answer to “How much will an investor pay for my house?”, the next question is: “Is it a good idea?” Despite the fact that you’re sacrificing a percentage of your home’s value, selling to an investor has certain benefits:
- It enables you to move out in days rather than months.
- It provides you with a complete, up-front cash payment.
- It requires no fees or commissions on your part (which can help to offset some of the loss).
- It eliminates your obligation to make or pay for repairs (if you decide to sell as-is).
- It can save you from foreclosure when the lender approves a short sale.
When deciding whether or not to sell to an investor, you simply have to weigh the cost vs. benefit. If you’re looking to liquidate an unwanted home after a divorce or a death in the family, selling to an investor is often ideal. It might also be in your best interest if you need to move quickly for a new job, if you’re tired of managing a high-maintenance rental property, or if the home simply seems beyond repair.
On the other hand, you might not want to sell your home to an investor if you’re in no hurry to move and you want to sell for the maximum value. Only you can decide what’s right for you.
At Get Fair Home Offers, we buy houses in Los Angeles for cash. If you’d like to determine for yourself whether selling to an investor is a good idea, we invite you to contact us today. We’ll give you a straightforward, no-hassle offer in as little as 24 hours. From there, the choice is yours.
We’re Southern California’s premier real estate investment firm because our offers are competitive, we handle all the repairs and cleaning, and we can close in as little as 7 to 10 days. Best of all, we’ll make an offer on any home regardless of condition.
Call us today at (626) 817-3351, and see just how much an investor will pay for your house.