Quick cash for your home? Not so fast!
The real estate market is hot, and, for those who own a home, you may have received offers or seen advertisements promising to buy it quickly and for cash. Selling a home is time-consuming, and the promise of a quick close is tempting.
However, it’s important to understand the difference between selling your home to a traditional buyer and making a deal with a home investor, sometimes called an opportunity investor.
Professional home investors make offers to sellers willing to sacrifice profit in exchange for a faster and simpler sale process.
In recent years, “iBuyers” have emerged, too — internet companies who use algorithms and proprietary valuation data to make no-obligation, all-cash offers to sellers.
BBB recommends the following tips to help you find the right kind of buyer for your home and avoid getting scammed.
Do you have time constraints?
With traditional home sales, buyers can require a 45-day escrow period to allow time for appraisals, mortgage approval contingencies, inspections and the like, which means completing a sale could take several weeks.
On the other hand, home investors can usually close in a month or less, and iBuyers can give homeowners a tentative offer within 24 to 48 hours and close in as little as a week.
If time is of the essence, it may be worthwhile to consider one of the faster options, although you’ll likely sacrifice profit for speed.
How much profit do you need?
The biggest con of working with a home investor or iBuyer is that you will almost always get a lower offer than you would from a traditional buyer.
Traditional buyers may be willing to pay even more than market value for a home they’ve fallen in love with, while home investors are buying your home solely as an investment. That lack of emotional connection can cost you the profit you may be counting on.
Determining in advance how much profit you need to make on the sale of your home can help you make a sound decision when you receive an offer from any kind of buyer.
Factor in prep work
When marketing your home to traditional buyers, you’ll need to do a fair amount of prep work: cleaning, decluttering, painting, staging, landscaping, photographing and listing your home.
When you sell to an investor, you won’t need to invest time and money into this kind of prep work.
“Typically, investors offer to purchase a property ‘as is,’ many times sight unseen,” according to Forbes magazine. “As a seller, that allows you to avoid any costly repairs that would normally be considered your financial responsibility.”
Research companies beforehand
Always look up businesses on BBB.org before you share personal information or agree to use their services. Make sure the company has an official name, phone number and physical address. Read customer reviews, keeping a close eye on any complaints or reports of dishonest dealings.
Beware home investor scams
Scammers prey on a seller’s desire to make a quick sale by offering deals that seem too good to be true. They also take advantage of the fact that home investors don’t need credentials to buy property.
When considering an offer, ask plenty of questions and don’t settle for vague answers.
Never give money to an investor before the closing date. Complete all transactions through a closing or escrow agent or a real estate specialty attorney. Don’t be pressured into payments “off the books.”
Consider your alternatives
If you aren’t pressed for time, consider working with a full-service brokerage. Although you’ll need to do some prep work, and it will take more time, you’ll likely make a much larger profit on the sale of your home.
You can also think about renting your home for an amount that covers your mortgage payments or setting up a lease-to-own agreement.
If you encounter a scam, report it to BBB.org/ScamTracker. Also, sign up for BBB Scam Alerts at https://signup.e2ma.net/signup/1900156/1902645/.
The nonprofit organization BBB was established in 1954 to advance responsible, honest and ethical business practices and to promote customer confidence through self-regulation of business. Core services of BBB include business profiles, dispute resolution, truth-in-advertising, scam warnings, consumer and business education and charity review.
