Should You Sell to An Investor or List on the MLS?
There are many real estate investor websites that self-servingly tout making “hassle-free” cash offers. We at 60 Second Home Buyers operate differently – we want to talk to you and recommend a home sale strategies best suited to you, the homeowner, and your needs, even if that means we don’t make a dime. This blog post is to advise homeowners like you as to when they should and should not sell directly to a real estate investor like 60 Second Home Buyers.
Both methods have their place and offer different advantages and disadvantages. You’ve heard of Aseop’s famous fable, “The Tortoise and the Hare,” right? Selling your home off-market to a real estate investor or investment companies is like “The Hare,” while selling on the MLS exchange with a real estate agent is “The Tortoise.” Let’s look deeper at some of the elements of each kind of sale.
Do you want a giant pile of cash for your property? One advantage of selling your home off-market to an investor is that investors buy properties with cash. Sales to a typical home occupant usually require conventional mortgage financing. Conventional mortgage financing can quite frankly be a huge headache. Completing the bank approval of a mortgage may take months, and banks can even decline the mortgage days before closing if something changes and the buyer does not qualify. Banks also refuse to issue mortgages when property fails inspection (or require more expensive repairs to be completed) or is appraised too low. FHA buyers and VA loans have even more expectations placed on the seller. It is all out of your hands. This irritating process can result in the seller wasting precious months. Cash offers from an investor eliminate the conventional mortgage finance struggle.
Unlike the saying, cash is not always king, however. Properties in great shape aren’t usually denied a mortgage based on a low appraisal or failure of the inspection. Sellers who are willing to wait to finish the sale won’t truly be impacted if their prospective buyer fails to qualify for the mortgage in the end. Cash provides little benefit in a situation where the property is in excellent shape and the homeowner is in no hurry to sell.
Time and Repairs
One benefit of selling to an investor is that real estate investors buy homes fast. MLS listing sales have time consuming steps that are not required with off-market sales to an investor. The seller must hire an Realtor with a local Real Estate brokerage, prepare their home, and take time out of their lives for showings. Some sellers are uncomfortable with the thought of strangers repeatedly coming through their home for showings. Even after a prospective buyer is located, there remains negotiations, home inspections, and bank appraisals. This MLS home selling process all adds up to months upon months, and in some cases even years of time before a sale is completed.
On top of time saved, selling to an investor won’t include any required repair time. These types of investors accept and buy the “as is” – you won’t have to make any repairs. A significant home renovation and sale takes around 4 to 6 months, even longer if the person coordinating it all is inexperienced. By selling directly to an investor, home sellers save time on repairs or renovations and can get moving on with their lives quicker. For example, companies like 60 Second Home Buyers in the US can buy single-family or multi-family properties in as-is condition.
Sometimes though, “The Tortoise,” wins the race. You might not mind waiting, and your home may be in good condition and doesn’t need repairs. If that is the case, you really don’t gain much from an investor’s quick “as-is” offer. The slow and steady MLS sale does yield a higher sale price. In this case, your best course of action would be to hire a local real estate agent and list the property on the MLS. Contact us for a referral to a qualified Realtor.
Increased Reach and Visibility
The main benefit of listing your property on the MLS exchange is that it increases the reach of your sale and allows for maximum visibility. Our interconnected world these days means that anyone with an internet connection can find the home you are trying to sell. Websites like Zillow, Trulia, Redfin, and Realtor.com can mean your listing can be seen anywhere in the world with just the touch of a button from their computer, tablet, or phone. This greatly increases your pool of potential buyers. A good Realtor can work with you to make your listing as appealing to buyers as possible, with staging tips, good photographs, and a vivid description. Multiple interested buyers can result in a bidding war that could drive up sale price.
But this visibility comes at cost: specifically, a 6% real estate agent commission. This amounts to thousands of dollars subtracted from your profit off your home. The question you must consider is: is 6% commission worth the extra visibility gained from the MLS listing? If your property is in great shape so that investors and home occupants will make competitive offers, then the 6% commission is absolutely worth it. Whenever we, 60 Second Home Buyers, renovate and resell our properties, we always use MLS listings.
If the property is in poor shape, it is a very different story. If a home won’t qualify for conventional mortgage funding, the only available buyer is going to be an investor, regardless of listing on the MLS or selling off-market. In this type of case, the increased holding costs incurred during a lengthy MLS listing process, including taxes, utilities, insurance, and maintenance, plus a 6% realtor commission will likely not secure you a higher sale price. If the property is vacant, unsecured, and in extremely bad condition, holding it may even come with a liability risk if there is an accident or injury on site. In cases like these, property owners should always carefully weigh their options and consider selling to a real estate investor like 60 Second Home Buyers.
So Who Wins In This Race – The Tortoise or The Hare?
If your property is in great condition, and you don’t have a pressing need for a fast sale, the MLS listing offers you a dedicated agent working on your and greater visibility to potential buyers – we’d recommend paying the 6% commission and listing on the MLS for an increased sale price. On the other hand, if a fast sale transaction, a cash offer, and no realtor commission fees is important to you, or if your property is in rough condition and in need of repairs, you should think about selling your home directly to an investor. We at 60 Second Home Buyers would love to work with you to achieve a sale.
If a quick sale to an investor sounds right to you or you need more information, please don’t hesitate to reach out to us today! Our team is ready and waiting to talk with you more about the options we can offer you and get you a free and fair cash offer.