By this time, everyone and their mother has seen the billboards and bandit signs for “Sell Your Home Fast” and “We Buy Houses”. Perhaps most people don’t give it a lot of thought until they find themselves in a situation where they have a property that they need to sell quickly. Suddenly the images of those signs come flooding the memory. But so do all the questions, “Is this a scam?”, “Is it safe?”, or “Is it even legal?” And while an ethical real estate investor might be able to offer a realistic and mutually beneficial solution, a desperate homeowner could find themselves adrift in a sea full of sharks if not armed with the right information.
First of all, it is important that the homeowner realistically evaluate their financial situation and value of their property. Distressed & desperate situations rarely happen overnight. They can be the result of loss of employment or income, mounting debt, or an inherited property that brings with it unwanted bills or taxes. If a property owner is behind on their mortgage payments, educating oneself on whether or not foreclosure is pending or if there are past due property taxes or HOA dues is imperative even before picking up the phone to call a real estate investor or house buyer. It’s also important to know what the property might be worth. Although the tax appraised value might be a good place to start, sometimes those values are considerably off the mark. Finding out how much comparable properties sell for in the neighborhood will give the homeowner a much better idea of what their property is worth.
It’s also important to understand how a professional house buyer works. They purchase properties at a wholesale price, put money into fixing them up, and then typically resell them on the open market. They might be a ‘wholesaler’ who will get a property under contract with the seller and then ‘flip’ or assign it to another investor to purchase it. Both options are legal and can be safe and ethical. Unfortunately, there have been quite a few bad apples that have given reputable real estate investors a bad name. So what can you do to ensure the investor you are working with isn’t going to try and steal your property?
Do these 4 things before you choose a home buyer
~ Before you, the property owner, even make the first phone call, make sure you’ve done the above mentioned homework regarding your financial situation and property value.
~ Go online and check out several investors. Look for someone who includes reviews or is a member of the Better Business Bureau. That’s not to say there aren’t shady individuals that belong to the BBB, but you are narrowing the playing field to folks that don’t mind being accountable to some degree.
~ Call 3 investors to take a look at your property and make you an offer. Do not fall for high pressure sales tactics of being forced into signing on the spot if you are not comfortable.
~ Look for the person that is going to take their time to assess not only your property but your personal situation. You may have tenants that need relocating or you yourself might need a little extra time to move. Perhaps you are facing immediate foreclosure. It is imperative that the investor clearly understands the entire situation.
My favorite tip
The highest offer may not be the best offer. There is a scrupulous practice in which an investor will come in and offer the moon for the property, just to get it under contract. However, during an option (inspection) period, they will come back and point out all the issues and ask for a price reduction. It is important that the contract transfers the property ‘AS-IS’. An option (inspection) period should be for informational purposes only unless an inspection should turn up something serious that was not disclosed by the seller. Another tactic to be aware of is a ‘contingency’ or a ‘subject-to’ clause. An investor planning to either assign the contract or flip the property to another investor will sometimes write in a contingency in case he or she can’t find someone to close the deal in time. This way they can back out of the contract with nothing to lose. There is nothing necessarily wrong with this tactic as long as they disclose their intentions. If you are in a time sensitive situation, this is not a safe option for you because you will have no control over whether or not they find a buyer.
Using a ‘we buy houses‘ investor for your unique real estate situation can be the easiest and most beneficial way to sell your property. There are many reputable investors that will work to ensure a satisfactory transaction for everyone. Doing your homework and asking the right questions will ensure that you find the right fit for your personal situation.