Often times, the thing we have of most value isn’t the cash (or lack thereof) sitting in our bank accounts. They’re more like the family heirloom passed down through generations, antique furniture, or literally the roof over our heads.
So what do you do when life happens and you need cash, fast?
Taking your precious items to a pawn shop one-by-one won’t give you the cash you need or compensate you for letting go of your family heritage. One option you have is selling your house.
Depending on your circumstances, you may not have the time or the funds to fix up your house and sell it the traditional way. But you certainly don’t want to let go of it for less than it’s worth.
That’s where investors come in.
People who specialize in purchasing homes and flipping them can take a lot of stress off your plate and get you the cash you need.
But before you strike a deal with anyone, there are some things you should do first to make sure you don’t get ripped off. So let’s jump right in and look at what those are.
Here are some things to consider before selling your house for cash.
Before Searching for a Cash Offer, Do Your Research First
One of the biggest financial decisions you will make is how to deal with real estate. Figuring out how much you can get for your house is a big part of that decision.
If selling your home is something you’re not entirely comfortable with, make sure you consider all other options first. Here are a couple of ways to get cash and keep your house:
- Home Equity Loan – Check into home equity loans, which are a type of loan where borrowers use the equity of their house as collateral for a loan.
- Cash-out refinance loans – These types of loans are also a viable option, where you replace your current mortgage with a new one that can allow you to pull out the value of your home in cash. But beware of replacing your current mortgage with one at a higher interest, as the amount you pay in the long run can significantly increase.
When you’ve exhausted loan options and selling becomes the right choice, make sure to do your research on your home’s value.
The value of a home depends on a lot of fluctuating market changes. Here are some ways to ballpark your home’s value and the costs associated with selling it:
- Check your comps – The first thing you want to do is take a look at comparable properties in your area. What are other houses with similar square footage, bedrooms, and bathrooms selling for?
- Figure out if you’re in a buyer’s or seller’s market – How many days are homes listed before an offer is accepted? If multiple houses are available for months at a time, chances are you’re in a buyer’s market.
What this means is there is more supply than demand for houses. In this type of market, buyers have more negotiating power and will likely ask for repairs and other fees to be paid by you.
A seller’s market is the opposite, meaning you’ll have an easier time selling your home.
- Look into repair costs – Take a good look at your house and be honest about what needs to be repaired. These costs need to be factored into the “value” of your house whether you’re considering selling through a real estate agent or to an investor.
Quotes for repairs are often free, so don’t be afraid to ask a professional directly for repair estimates.
- Get an appraisal – The best way to know the value of your home is to get a professional appraisal. These average about $300-400 for a single family home and may be well worth your time if you’re trying to get top dollar for your house.
Doing your homework helps you figure out which offers to entertain when considering selling your house.
If you sell through a real estate agent, you’ll need to factor in their fees, which are typically 5-6% of the closing amount. Depending on whether you’re in a buyer’s or seller’s market, you may have to make extensive repairs to your property.
If you decide to sell your home quickly for cash, things change a bit. Here are things you need to consider when selling your home to an investor for cash.
Consider What Investors Need to do to Make a Profit from Austin Homes
Everyone wants to get top dollar for their house with the least amount of stress possible when selling. Finding a reputable investor to pay cash for your house is one of the easiest ways to take all the stress out of the process.
The amount you’ll be offered will be lower than if you sold it yourself. Here are several reasons why:
- Wholesale costs – Wholesale companies may give you an offer and then sell it to interested investors at a slightly higher cost. Without them, it may be hard to find good investors and chances you’ll get scammed are higher. Factor this cost into the value of your offers and figure out what it’s worth to you.
- Repairs – Investors need cash to repair the property before they can sell it. If they buy the house as-is, they may run into unknown repairs and have to shell out even more cash. This is a risk they take off your plate. Once you sell your house for cash, you walk away stress free and never have to think about these problems again.
- Capital gains – Any profit investors earn from selling your house are subject to federal taxation. In order to earn any profit, there needs to be a reasonable margin.
You’ll also save on a lot of costs you’d otherwise need to pay if you sold your house through a realtor. Here are some expenses you won’t have to pay when you sell your house for cash:
- Real estate fees – In Texas, real estate agent fees are 5-6% of the total sale price of your home. This cover’s the commission to both buyer and seller real estate agents and their respective brokers.
- Closing costs – Closing costs cover miscellaneous fees relating to title and loan document preparation, recording fees, and escrow. On $100k, closing costs can be about $3k so don’t be surprised by these hefty fees that get tacked on at the end of a sale.
- Selling expenses – When selling your house on your own or with a real estate agent, be prepared to pay for inspections and appraisals to get you through the selling process. These can end up costing a couple thousand dollars on average.
- Repairs – If you have any major repairs that need to be done in order to sell your house, factor those in. Remember, you’ll need cash up front to get repairs completed.
- Mortgage – You’ll need to keep paying your mortgage in the months it takes to prepare your house for selling.
As you can see, selling your house is associated with a lot of extra costs and can take a lot of time. If time and money are things you just don’t have, then selling your home to an investor for cash may be the right choice for you.
When looking at offers, make sure you’re aware of the expenses you’ll avoid. But remember those expenses and stress get passed onto someone else and are reflected in offer amounts.
You certainly don’t need to accept extremely low offers, but make sure your expectations are reasonable.
Here are some tips on how to tell if the investor you’re working with is trustworthy.
Which Texas Investors Can You Trust Not to Rip You Off?
Getting ripped off on your home price is the last thing you want.
Beware of these signs of people who are trying to scam you:
- They offer unreasonably high offers – this may be a bait and switch technique for them to change their offer later on
- Really low offers
- Unwilling to meet in person or take a phone call
- Charges you a large application fee or has other upfront costs
- Not listed with the BBB
- Stall on closing the deal – This is a tactic to get buyers to reach a state of desperation and become financially strained, increasing the chances of them accepting a low deal
If you live in the Austin, TX area, Jerred is an excellent real estate consultant with a reputation for honesty and transparency. He can help you sell your house as-is with flexible closing dates and connects you with reputable investors.