Selling your home shouldn’t be a chore. Especially when you’re in a hurry. Unfortunately, the process has the feel of big-business, and can cause severe anxiety for many people. Often times, the homeowner would rush to the nearest real estate broker and sign their soul to a lengthy contract.
What many homeowners don’t know is that they could sell much more quickly to an investor, in a shorter term purchase contract, and not have to pay a commission. You may have seen the “I buy houses” signs, and heard how you will always get a low-ball offer. Well, those are wholesalers. They tend to have a massive database of cash investors who are rehabbers. The wholesaler must get a deal on the property in order to make a profit for themselves, and the flipper. But that doesn’t mean it would necessarily be the only offer you receive.
How fast do you want to sell?
I ask this question because the answer determines the offer you would receive from an investor. If you need to sell within 30 days and have quick cash in your pocket, you have to be open-minded enough to give up some equity. The investor is taking on risk by purchasing your home as an investment, and the instant equity is the #1 incentive that they have to make it worth-while.
In most cases, you WILL receive a cash offer. That cash offer is going to be, at the most: 65% of ARV – rehab costs – wholesale fee (if there is one).
This equation is going to be the offer in many areas of the country. Of course, this may not be the case in markets where home prices are inflated.
While you may get a lower offer than you planned, there are some cases in which you could walk away with cash at settlement, and cash flow for months to come. This is a meet-between method of selling your home fast.
How does that work?
Let’s say you just want to be sure the investor has something to lose (other than their reputation, closing costs paid, time wasted, etc.). Will a $5000 payday at settlement cure your fears? If so, you may be a candidate for a partially seller-financed deal. The investor may be using financing – hard money or traditional, which would require you to take a subordinated note for the balance of your equity. This can be very attractive to investors for a low-down deal while satisfying your need for cash ASAP. They can take over the property (including all upkeep, repairs, and management of the property as a rental). You simply take your sweet deposit and collect a regular check on a monthly basis!
Do you really need cash now?
If cash wasn’t a huge issue, then why not take cash flow, make a killing in additional profit ABOVE your asking price, and have a buyer in place down the road?
This situation would allow you to keep control over your equity, and sell on a lease with option to purchase. The way this works is this:
Sale price = $100,000
Option fee = $10
Monthly cash flow = $500
Term = 5 years
What happened is you have taken $500 per month for 60 months. This amounts to $30,000. At the end of the 5 years, the investors still have to come up with the $100,000 or walk away! In most cases, they will simply take their option and finance the deal.
What have you lost by doing a lease option? Zilch. Within the lease option, the buyer has to maintain the property. They take care of the lawn-mowing, and basic upkeep. If they walk away (which is less likely), you can simply do it all over again and collect that cash flow!
Don’t want to pay taxes, major repairs, insurance, and just want out?
You can still be creative! If you are still willing to take monthly payments, you can rid yourself of the responsibility of keeping the deed in your name by providing seller financing. Often, you will still receive a down payment of some sort at settlement.
A land contract (also known as contract for deed), is one way to have the buyer take over the tax responsibilities, and require them to obtain homeowners insurance. In addition, they can be completely responsible for major repairs. Everything is negotiable as long as it is not restricted in your state.