You’ve probably heard all the phrases before: Off-market, For Sale by Owner, FSBO, We Buy Houses, Cash Offer… it can go by many different names, but it all means the same thing. These are all phrases used to describe selling a property without listing it with a Realtor (or agent). Listing a property on the market with a Realtor is often seen as the most “traditional” method of selling a house – but there are also a variety of options for selling your home off-market.
Why sell a house off-market? It can usually be summarized something like: You own a house that you want to sell, but don’t want to deal with the typical headaches of a conventional home sale process.
This article will be a comprehensive guide to selling a property off-market: the pros and cons, the do’s and don’ts, strategies, and advice. It is written from the perspective of selling in North Carolina, but the overall principles can be applied to all 50 states. Because the majority of off-market purchases are done by investors, this guide will also focus on tips for vetting these investors or investment companies.
- OFF-MARKET SALE OVERVIEW
- REASONS FOR SELLING WITHOUT AN AGENT
- PROS OF SELLING OFF-MARKET
- CONS OF SELLING OFF-MARKET
- HOW TO VET YOUR BUYER
- HOW MUCH WILL AN INVESTOR PAY?
- AM I GETTING A GOOD DEAL?
- DOES YOUR HOME NEED ANY REPAIRS?
Selling without a real estate agent, known as listing “off-market”, is a viable option for experienced home sellers who are willing to put in the time and effort. Although the process usually ends with spending less time and less effort than the conventional agent route.
In North Carolina, the average agent commission rate is 5.4% to 6.6%. If you sell a house worth $230,000 — the median home value in the Triangle — that’s up to $15,180 which is a huge chunk of your potential profits. Avoiding fees and commissions is the best way to put more money from the sale into your pocket.
Key Benefits of Selling Off-Market
- Total control over how your home is sold, including the pricing strategy, showing schedule, and negotiation process.
- No listing commission, which could save you 6.6%, based on the North Carolina average.
- Accelerated closing schedule, as most transactions occur with cash and do not require bank/lender underwriting periods.
- Simplified closing process with less paperwork
- Minimal or no repairs required to the home
Selling off-market does carry some risks. Research shows that FSBO homes typically sell for about 6% less than those listed with agents. How do you balance these risks/rewards in order to make the best decision possible? We’ll explain everything you need to know to successfully sell your house without a realtor: a breakdown of North Carolina realtor fees, closing paperwork, and tips to walk away with more cash from your sale.
There’s no shortage of options to sell your home, but there are plenty of situations where you may need to sell fast. This guide will walk you through everything you need to know when selling your house without a Realtor.
Home investors like Green Street in Durham are professional investors that specialize in residential purchases as an investment strategy. Your home is paid for with cash up-front, so you don’t have to go through the costly and time-consuming hassle of finding a realtor, listing your property, staging it, showing it, and everything in between. Investors provide an alternative to the traditional, long form sale process.
Who would want to sell to an investor rather than list the house on the open market? Selling your house to an investor appeals to a variety of home sellers, many of whom need to get out of home-ownership fast, including:
1. Inherited homes
Inherited properties often come unexpected from relatives, and they’re not always welcome. If you’re not living in an inherited home and don’t have time to rent it out, it’ll sit vacant, attracting thieves, vandals, and squatters.
Selling an inherited home to an investor gives you cash up front, while relieving you of any financial responsibilities. An inherited home comes with capital gains taxes that can be minimized by liquidating it fast.
2. Foreclosures
When you fall behind on payments, the bank forecloses on your home. It’s an experience nobody should have to go through. The global Covid-19 pandemic has created especially tough situations for many people and decreased their ability to pay their mortgage payments.
Selling a property to an investor for cash can save you from the negative financial impact of foreclosure. It gets your house out of the red through a short sale process that’s fast enough to beat the bank’s foreclosure. This gives you the opportunity for a fresh start, with some cash in hand to help you move on to the next chapter.
3. Major damages
Selling a house with a leaky roof, broken air conditioning/heating, flooding basement, mold issues, and other major problems on the MLS is difficult. Every day your house is on the market it costs you in utilities and missed opportunities for that revenue. With construction costs at all-time highs in North Carolina, the tradeoff performing these types of repairs can be costly. Investors typically buy properties in “as-is” condition, relieving you of the time and cost of repairs.
4. Needs to close on a specific timeframe
Some sellers have a specific schedule they need to sell by for a variety of reasons. Playing the highs and lows of real estate is difficult when there’s a 68-day average turnaround time. Selling your house to an investor gives you full control over the sale timeline. You can get things done on your schedule with cash up front that can be budgeted accordingly. A good investor is flexible and will work with your moving timeline, closing dates, and any unique circumstances your sale process will contain. Investors also pay with cash – so waiting on paperwork and funding from banks is never an issue. 5-10 day closings are common when working with experienced, quality investors.
5. Relocating
Sometimes you need to move for work. Other times, you need to leave town for family or personal reasons. Either way, you need to sell the house fast if you’re relocating to afford some place to live at your destination.
Consumer Affairs estimates the average in-town move costs $80-100 per hour, while moves over 100 miles cost upwards of $5,000. Selling your house to an investor gives you money upfront to pay for relocation expenses.
6. Facing divorce
If you are getting a divorce, you and your spouse may need to sell your house, unfortunately, If neither partner wants to continue to live in the home, neither is in a financial position to buy out the other party’s half, or the property division aspect of your divorce settlement requires you to sell the house and split the proceeds. Selling your house before or after divorce to an investor gets the process done fast and easy.You won’t list your house on the market, so you will have privacy on your situation until you’re ready to talk about it.
7. Unwanted rental
Selling is made worse when your property is tenant-occupied. The last thing you need is to be labeled a slumlord or get involved in sticky legal situations with Tenants.
Selling your unwanted rental property to an investor relieves you of the responsibility. You no longer need to market and maintain the property, try and collect rent, or worry about evictions. During the pandemic, Governor Cooper made it even more difficult to complete the eviction process in North Carolina. Investors pay you cash and handle the property and tenants.
8. Your Home is in a Bad Neighborhood
A conventional mortgage generally lasts 30 years. A lot can happen to your neighborhood in that amount of time! Unfortunately, a lot of areas go downhill. Or, maybe you were trying to get started as a landlord on a low budget home and were forced to buy in a difficult area to get started. Now you want out of the property because the area didn’t appreciate as quickly as you had hoped.
Selling your house to a good investor is the fastest, most efficient way to get cash-in-hand for your home. It does matter the condition or situation. You skip the prep work and cut out all the middlemen to get the optimal price for your home, less the expense of any repair work needed. Like anything in life, selling your house to an investor has pros and cons. Next – we’ll talk about the benefits and drawbacks of selling without a real estate agent.
1. Faster Closing Times
There is simply no faster way to move your house through the sales process than by selling to an investor. Many properties can be sold in under a week. You don’t have to list the property, stage it, market it, wait for a buyer to make an offer or get stalled in negotiations.
Selling your house to an investor can be done within the month, no matter how difficult your personal situation is. All contractual terms are laid out up front, so there’s never any surprises. This streamlined process lets you put this house behind you and move on with your life. All this of course assumes that you are working with a true professional investor.
2. Avoid Contingencies
Most real estate buyers have contingency clauses in their house offer contracts. These clauses essentially allow them to nullify the sale if certain conditions aren’t meant. Terms usually include the home’s condition and clearance of all legal paperwork. In North Carolina, you’ll see a lot of foundation and flooding issues. Sometimes the clauses come up right away, but many can come back months down the road.
Selling your house to an investor is a straight-forward process that avoids contingency offers. Instead, you’re given an offer that reflects the true value of a home in its current condition, “as-is”.
3. Flexible Financing Options
Many of the delays in the real estate process are caused by the banks. Because real estate involves six and seven-figure loans (or higher), the bank has to overcome a lot of hurdles. Both your current mortgage (if you have one on the property) and the buyer’s potential to qualify for one are major factors in whether you can sell the house. Lending standards have been jumping all over due to the pandemic, so it’s really a crapshoot on timelines. We have seen many traditional deals fall apart that would have closed a year or two ago.
Selling your home to an investor eliminates the banks. You can choose to receive cash by wire or check. Because the investor is also acting as the bank, you can get cash in your pocket with no out-of-pocket costs.
4. Ease of Selling “As-Is”
Selling your home can take months to years of preparation before even listing. You have to fix problems, clean the house, paint, clean the landscaping, address flooding/leaking, and repair everything. Then the home must be staged and secured while people tour it.
Selling to an investor skips all these expensive steps. A good investor will get you a fair market price for your house without putting in all the time and effort. It’s an ideal way to cut any losses and start anew.
Of course, there are cons to selling to an investor you need to know about before making any decision.
If selling to an investor were all sugar and spice, everyone would be doing it. There is a reason that the majority of home sellers choose to go with the “traditional” sale route and hire an agent. The truth is there are bad apples in every industry (these days it seems like too many bad ones), and home investors are no different. Avoiding home investor scams requires some knowledge about the industry in avoiding these pitfalls.
1. Lower Sale Price
It’s true – selling to an investor will likely get you less money than a traditional home sale process. On paper, it can be quite a jump, but there’s obviously a reason for that. The convenience of a cash-up-front offer comes at a price that covers the investor for any backend work you’re avoiding. Investors are in the business of making money and buying properties at under market value is the only way to ensure a profit.
Home investors bring the building up to code, fix cracked foundations, sometimes even demolish the structure and rebuild on the property. These are options that require contractors, equipment, and resources the average person doesn’t have. While you won’t be paying out of pocket for these expenses, the cost will be rolled into your cash offer.
2. Possibility of Fraud
Unfortunately, the same internet that made real estate tools like Zillow and the MLS accessible to more people also enables con artists. There are plenty of disreputable criminal organizations who would love to take legal possession of your home for free or scam you out of money. Due diligence is needed to ensure you’re dealing with reputable companies. One tip is to look on the company’s website for some information about who works at the company. A legitimate company will usually have an “About Me” page that shows who owns the company, their story, and some personal information about them. If it’s hard to figure out who you’re working with – odds are they are either not reputable or hiding something.
3. Missed Opportunities
The fact is, owning real estate is a great investment – that’s why we’re in the business. Becoming a landlord can earn you a 10-15% monthly ROI that’s not dependent on the actual sale price of your house. Services like Airbnb, Craigslist, and Couchsurfing make finding tenants easier than ever. Some people simply don’t have the time to dedicate to these income streams. While mostly passive, being a landlord involves a lot of hands-on work. Whether you don’t have time or it’s just not the right location, sometimes you miss out on a good opportunity to find a better one somewhere else. If your “investment” is actually just a burden – it may be time to cash out and focus that capital elsewhere.
Before dealing with any home investor, be sure to look them up with the Better Business Bureau, Federal Trade Commission, and any trusted review sites online. Also check out their Google Business and Facebook pages. Legitimate real estate investors have no reason to hide and often are active on social media networks.
Contact these people and talk to them directly. Keep an eye out for ads or websites riddled with typos or don’t have valid business addresses, missing or bad online reviews.
As hinted at above, the amount an investor will pay for your house will vary widely based on the investor, market conditions, and your home’s condition.
The first thing real estate investors look at is your home’s fair market value. This is the price market analysts estimate that your home should sell for based on location, the surrounding neighborhood, amenities, and other factors.
A variety of online tools help you determine your home’s fair market value. You can also perform a comparative market analysis (CMA) by checking the value of comparable homes in your neighborhood and city.
The Federal Housing Financing Agency’s house price index (HPI) calculator tracks mortgage transactions from the 1970s through today to show you market fluctuations and a variety of other factors. Just enter your address, and you’ll get a value estimate.
Of course, the most common way a home’s value is determined (whether sold on the open market or through a real estate investor) is through a professional appraiser. Professional appraisers are hired by the home’s buyer and seller to inspect vital aspects (roof, foundation, plumbing, appliances) to determine the fair market value.
A lot of sellers we speak with are confused over Zillow’s Zestimates or how much their neighbor’s house is listed for. Zillow simply uses an algorithm to guess what your property might be worth, based on numbers only (not the conditions or repairs needed). This number may be in the right ballpark, but a review of the conditional by a professional is needed in order to accurately assess.
Selling your house to an investor rolls the costs of repairs into the price.
You don’t need to take the first price offered by your real estate investor. Negotiations are common in both market and investor home sales. You’re always welcome to hire your own appraiser and negotiate to perform certain repairs, etc.
Keep in mind, however, these negotiations and repairs will extend the time it takes to complete the sale of your home. Scheduling contractors, ordering parts, and organizing the work around your schedule can be a pain. That’s why only professional investors typically bother.
If you take the time to complete all the work, list your home, pay commissions to the realtors and loan closing officers, bank fees, and everything else, you’ll see it may not be worth the hassle. Just keep that in mind when negotiating the final price of your home.
When you sell your house fast for cash, you’re skipping a multi-month process and getting money deposited to your account within a month or less. Cash buyers will usually pay less than Market Value for a home, but that offer typically comes with unique advantages you wont get with a Traditional Sale.
You’ll need to view the offer you receive differently in order to determine whether or not you’re getting a good deal.
When you sell through a real estate agent, you’re usually working with a buyer who is going to secure a mortgage loan for something fairly close to the price you’re asking for your house. But some buyers can wait over a month for a loan if they aren’t pre-qualified. This can stall your plans to relocate or access cash you need now.
If the offer is 20% less than what you were expecting, but it drastically expedites your timeframe, this may be worth it to you. If the home is facing code violations, is unlivable, expensive to maintain, or if you need to move urgently, you might find it worth it to take a little less than a market value offer to just be done with the entire process.
What does your local market tell you?
In slow markets or areas where people don’t want to live, homes almost never sell for their full market value. Most areas of North Carolina are pretty hot right now, so we are seeing some houses sell for over market value. However, the other side to that coin is that agents are now listening for over that market amount, but they’ll wait around on the market for months until the seller eventually accepts an offer that was lower than what they wanted. Price drops are one of the most frustrating things a seller can deal with.
Don’t look at listing prices or average values.
Look at the amount that properties actually sell for in your area. Again, this is where Zillow can be deceiving. It’s programmed to show you only active listings, not what properties recently sold for.
If it’s different from what the sellers were asking at first, you can expect a reasonable cash offer on your home to look closer to the final sale number.
Keep in mind that most people who sold their homes worked with a real estate agent who also took at least 5% (though sometimes more) of the final sale price as commission. This also doesn’t take into account closing costs and escrow fees.
In reality, sellers actually receive less than what it appears they made.
If homes aren’t selling at all in your area, it can be hard to determine how much would constitute a fair offer since you don’t have anything reasonable to compare it to.
When this happens, you’ll need to look at the other factors surrounding your home to make that decision such as the condition. If the market is really that bad, almost any cash offer might feel fair if it fixes your problem.
If your property needs a lot of work, buyers on the regular market may not be interested at all. These people want homes that are move-in ready. They might have a hard time getting a mortgage on a property that’s in bad shape, even if they don’t mind fixing it up. Conventional lenders like banks typically do not offer loans for properties in poor condition.
Homes that need a lot of repairs complicate the situation. Think about how much money it would take to fix your home.
Is it somewhere in the tens of thousands of dollars to completely overhaul your property?
Do you have that much money available to repair the home on your own?
The offer you receive from a cash buyer will likely deduct the cost of any repairs required.
The benefit for you is that you won’t need to spend that money to make the property appealing – you’ll just take the cash you would have profited anyway.
Most cash buyers will be able to explain their offers, especially if they’re professionals. It’s advised that you inquire about any cash offer you receive and how exactly those numbers were put together, to ensure the offer you receive is fair.
Professional investors can show you what they need to do for repair and tell you how much it’s going to cost. In the end, it should check-out and make sense to you. Properties that are in need of serious help are usually great options for cash buyers and sellers alike who just want the home gone!
Homeowners in dire situations will turn to quick cash buyers to save them in an emergency. This is most common with foreclosure, or when foreclosure is imminent.
Since foreclosures sticks like glue to your credit report for up to seven years, and are nearly impossible to work off, homeowners try their best to avoid the foreclosure process from being completed. They do this by finding a buyer with cash who can work quickly to complete the sale before the lender auctions off the home.
In these situations, any offer that satisfies the lender and gets the seller out of jeopardy is a good offer.
You can’t profit off of the sale of your foreclosure home unfortunately. All of that money needs to go directly to the lender anyway. You really can’t lose in a situation like this.
Professional cash buyers will know how to work directly with your lender to come to an agreement about an asking price.
It’s generally advisable to take any offer that will help you meet your requirements and save yourself from foreclosure.
These kinds of emergency sales don’t look stunning on your credit report either, but they disappear much quicker and they’re far easier to work off with regular positive activity on your accounts.
It’s certainly not for everyone, but if your situation is a little offbeat, it might be worth turning to cash buyer. Cash buyers are used to solve problems. If you’re not expecting the perfect sale of the perfect home in the perfect market with the perfect agent, a cash buyer might be right for you.