We’ve all seen those signs for the “ugly house” buyers. Maybe you’ve personally considered giving them a call. But what do they do exactly? What’s the process, why do people choose to sell this way, and is it even legit? Grab a cup of coffee (I’m already on my 3rd), and let’s see if I can answer these questions.
Our family has been investing in real estate since 2006, so I’m pretty well-versed in how this works. First, let’s talk about what a traditional sale on the open market might look like, and then we’ll compare that to a sale to a real estate investor.
Traditional sale:
The first step is to find a great agent who knows your area well. From there, the preparation of the home for the market begins. This includes paperwork, cleaning, staging, more paperwork, photos, and more paperwork. This process can take weeks. Once your property hits the market, potential buyers traipse through your home with their agents while you wait, drinking copious amounts of liquor or coffee, definitely Pepto-Bismol, for offers to come in. The average days on the NWA area market are 89 days (as of July 2023).
Once the home is under contract, it takes anywhere from 30-45 days to close and fund. During that time, you, the seller, sweat through an option period while drinking more coffee/liquor, which can last up to 10-14 days (the option period, not the liquor), where the buyer has the unrestricted right to back out of the contract for any reason. At this point, the buyer will bring in a 3rd party inspector to go through the home with a fine tooth comb, unearthing every possible issue, from the crack in the fireplace tile to the struggling HVAC. While it is vital that a buyer does their due diligence, it is also a very stressful time for the seller.
If all goes well during the option period, the buyer’s lender will order the appraisal, and you will enter yet another waiting period to be sure the home meets value. At this point in time, you will probably now exist solely on Pepto Bismol. On the closing date, you must vacate and clean the home for the new buyer. Traditional home sales usually have very little flexibility because you are working with buyers who have timing constraints of their own that need to be met. Plus, they won’t want a Pepto-Bismol addict living in their new home.
About 80% of home sales typically happen this way. That’s a lot of liquor and Pepto Bismol.
The other option is:
Selling to an investor:
First of all, it is legit. Well….if you’re dealing with a professional homebuyer. We’ll address that in another post. Overall, you may wonder why someone chooses this route anyway. Here are the three C’s of why this could be a good option for a seller.
Controlled Sale
Convenient Sale
Critical Sale
The Controlled Sale is an ideal option for homeowners who desire greater control over the timing and pricing of their property sale, and alcohol and Pepto just won’t cut it for them. This approach is particularly advantageous when the seller needs to secure the proceeds from the sale to rent or purchase a new residence, and they need to remain in the current home until the transaction is complete. Reputable investors or investor companies involved in Controlled Sales often offer the flexibility of a short-term lease back or transition period, allowing sellers to smoothly transition to their next living arrangements. Additionally, a Controlled Sale can be an optimal solution for individuals experiencing legal issues such as divorce or undergoing a relocation for work, where precise timing is crucial. With a Controlled Sale, sellers can confidently navigate their unique circumstances while maintaining control over the sale process and eliminating much of the stress.
Then there are those sellers who may need a Convenient Sale. They simply do not have time for the repairs or preparations needed for listing with a real estate agent. The seller might have inherited the property with or without a probated will, and there are legal ramifications to wade through. The seasoned investor is knowledgeable about working through heirship and probate issues.
Perhaps the seller is dealing with an emotionally charged situation and is in no position to cope with open houses, inspection periods, or be subject to the pressures of a demanding buyer. It is common for a landlord looking to exit the rental business, who needs to sell and is mindful of the tenants still in place, not wishing to disrupt them or cause undue pressure or stress. Simple and smooth is what the seller who needs a Convient Sale is looking for.
Finally, a Critical Sale can be a lifeline for sellers facing urgent financial circumstances. Whether the seller is caught amid bank foreclosure proceedings, struggling to maintain the property, or paying mounting property taxes, time is of the essence. Unlike a traditional market sale, a Critical Sale provides a fast and hassle-free solution. With the help of someone knowledgeable about the foreclosure process in Arkansas, a smooth and quick sale can be achieved. For sellers in dire need of a quick exit strategy, a Critical Sale is the answer they have been looking for.
So now that we’ve identified the three “C’s,” let’s talk about what an investor does. A reputable real estate investor will likely come in and purchase the property with cash, a short closing, and a timeline to address any of the three C’s we just mentioned. Their process should be simple and straightforward. However, the negative is you will not get as much money for your property going with an investor. They typically look to purchase properties somewhere around 65-75% of retail price. Remember, they are business people, not a charity. Their exit strategy will involve taking into consideration how much it will cost them to make repairs or updates and the value of the property after repairs are made (ARV)
Selling your house to an investor is all about convenience. Think about the difference between a 7-11 and a grocery store. You’ll pay more for a loaf of bread at a convenience store, but it sure is easy to run in and grab it.
For a lot of people, however, it is more important to get as much cash out of the sale of their property as possible, so it’s worth it to them to go the traditional route. Remember, everyone’s situation is unique.
So now you know the difference between selling on the open market versus selling to a real estate investor.
If you have more questions, check out our family business’s website at http://www.sellmyhousearkansas.org, where you’ll find more info on the process and learn what to look for in a reputable investor. That way, you don’t end up hooked on Pepto-Bismol after all.
The Overly Caffeinated Agent 