Based on your circumstances and interests, the answer depends. It could be more beneficial to work with one party over the other. Most people tend to go the traditional route and work with a real estate agent, but there are several instances where selling to a property investor may be better. Let’s explore more differences between the two options below.
Traditional vs. Unconventional
The traditional route is selling your property with a real estate agent. Real estate agents are licensed professionals representing buyers and sellers of real estate or property. Agents typically work under the supervision of a broker or firm, performing key roles such as market research, identifying property assets, staging the property, listing the property on the local Multiple Listing Service (MLS), and more. They also help sellers with drafting and preparing critical documents like offers and closing statements.
An alternative and unconventional option, however, is selling your house to a property investor. Essentially, a real estate investor is an entrepreneur or company looking to put offers for properties, make renovations, and sell them later for a profit. While most home buyers are looking to purchase a home to live in, real estate investors see your property as a business transaction. Ultimately, negotiations and sales with property investors may look different compared to the process with traditional home buyers.
True Market Value vs. Below Market Price
When working with an agent, they will strive to help increase the value of your home to sell it at a fair or higher market value. Depending on your home’s age and condition, your agent may recommend you do some repairs and improvement projects to put more money in your pocket. Such repairs may include paint jobs, fixing kitchen appliances, refinishing floors, and upgrading roof problems. Traditional homebuyers often look for homes requiring minimal maintenance. Ideally, these upgrades should help smoothen the home selling process and generate a more significant return investment.
On the other hand, real estate investors want to purchase your house as-is, meaning you don’t need to spend time or money on repair expenses. Many investors will buy your home fast with cash but for a bargain or below the market value compared to if you completed updates before listing it. While the cut-price may be less enticing, you should consider selling to an investor if you can’t afford or don’t want to cover the costs of major renovations.
Financing vs. Fast Cash Offer
With most traditional home buyers, you’ll have to wait on financing and mortgage issues to settle before finally closing the deal. Unfortunately, even after a buyer has already been pre-approved for a loan, lenders may rescind the offer if they deem a buyer’s creditworthiness poor or if there are any changes. If lenders refuse to issue the funds to purchase your home, there may be further delays, or the deal may fall through entirely.
Contrarily, most investors purchase properties in cash (albeit at a lower price), so there’s less uncertainty involved. Fast cash offers enable you to forego the financing and mortgage process and get straight to the closing table. Once you and the investor agree to the transaction conditions, you can sell your property immediately. The average closing time with all-cash investors is typically two weeks, unlike traditional home buyers, which could take double the time. A fast closing time is beneficial for sellers facing issues like foreclosure or divorce.
Help Sell vs. Want to Buy
Real estate agents help list and sell your property out to others. Specific tasks of real estate agents include:
- Identifying repairs and improvements – Agents can help determine whether you should spend money on repairs. Their connections enable you to find quality contractors, inspectors, repairers, and more at reasonable prices.
- Securing professional photoshoots – Agents frequently work with professional photographers to attract more leads and lessen your house’s listing time.
- Conducting a pricing analysis – Before listing your property, agents will conduct a comparative market analysis (CMA) to determine an accurate selling price through factors like your neighborhood, lot size, number of rooms, etc.
- Marketing to potential buyers – Agents will help broadcast your listing on different platforms, including your local multiple listing service, social media, and even their realtor’s website. From descriptions to photos, agents will market your home to attract the best offers.
- Closing the deal – After receiving offers, your agent will review and negotiate terms and paperwork to win you the best deal. They’ll guide you through the process until your home’s keys are in the hands of its new owner.
Conversely, real estate investors want to purchase your property outright. Selling your home to a real estate investor means you’ll bypass the prepping and staging process altogether and go straight to the transactional agreement. There are many reasons behind an investor’s motivations for purchase. Whether that’s doing renovations and flipping the house to sell later or tear it down to develop buildings over it, it all boils down to one thing: profit.
Commissions vs. No Commissions
Real estate agents receive their earnings through commissions made on the sale of your home. Commissions typically range from 1-5 percent depending on the property; hence the commitment agents put in to earn you, and them, the highest offer possible.
However, real estate investors don’t take a commission. Since they have no commissions, you will get to keep all of the money they offer for your property with possibly fewer closing costs. An investor’s earnings on a property result from various methods, including:
- Renovating, or “flipping,” and selling the property to other investors or homebuyers
- Changing the property to a rental
- Bundling several properties together and selling them as a bulk
A Final Glance
Whether you work with a real estate agent or sell to a real estate investor, there is no right or wrong answer. Depending on your financial goals, timing, and property condition, choosing one party may prove more beneficial than the other. If you’re still unsure which path is best for you to sell your property, consider reaching out to a local realtor for a free consultation or an investor for a free cash offer.