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Seller's Guide To Maximum Profit And Minimum Stress
We are currently in the strongest seller's market ever. Not only are selling prices at all-time highs, but the options for selling your home have never been so plentiful. With more options, however, comes more confusion.
Markets can change quickly and unexpectedly. As of the end of March 2022, interest rates have moved steadily upward due largely to inflation. As interest rates climb, the purchasing power of buyers recedes. So far, the higher interest rates do not appear to be affecting the strength of the housing market; however, over time it is inevitable that higher interest rates will stymie buyer interest.
Get to know your potential buyers
Click on Buyer Type for more details
Wholesalers "buy" a home in order to sell immediately to an iBuyer or individual flipper. Wholesalers will usually attempt to assign the contract to the real buyer at closing so that the wholesaler can avoid using its own cash in the transaction. Often, however, the wholesaler will represent himself as the actual buyer. If you are receiving unsolicited calls and texts about selling your house, they are likely coming from a wholesaler. Wholesalers generally will make a transaction as simple as possible (cash sale, short option period, fast closing date if desired) but the offer will likely be lower than offers from other buyer types. Wholesalers focus on unlisted properties. Pro tip: wholesalers are professional salespersons and skilled negotiators looking for good deals. Be very cautious in dealing with them.
iBuyers (Institutional Buyers) purchase large numbers of homes for profit. They may be looking for homes to flip (renovate and sell immediately) or hold (lease in short term, then sell for a profit). An iBuyer may be looking for distressed homes with lots of renovation needed or homes with minimal renovations needed. In some cases, an iBuyer may offer very flexible terms on when the Seller must vacate. iBuyers often have internal departments which scour the MLS (Multiple Listing Service - the database of available home used by real estate agents) for homes and also advertise to find potential sellers that have not yet listed their homes. In general, an iBuyer offers higher prices than a wholesaler, but their goal is still the same, i.e., to make as much money as possible. Most fix-and-flip iBuyers are looking to 20-30% profit after cost of renovations. Thus, if a flipper expects to sell a renovated house for $500,000, the total cost of the house and renovations should be between $350,000 and $400,000.
Individual investors are similar to iBuyers, but tend to buy smaller numbers of homes and are more interested in buying the right home than buying a large number of homes. Individual flippers are generally looking for low priced homes that need considerable renovation. Individuals investing in order to lease, on the other hand, are generally looking for homes that they can lease immediately upon closing. Because individual investors are more focused on looking for homes with particular characteristics, they often will pay more than an iBuyer.
Individuals buying for purposes of living in the purchased home are likely going to pay the highest price. They may or may not be willing to make their own repairs after the sale. Very few occupant owners pay cash at closing, so the lender is involved in valuing the property as well as the buyer. Depending upon the type of loan that a buyer is pursuing, homes that are not livable or are in a state of continued deterioration may not be an option, even to a occupant owner who is skilled and willing to renovate after closing. In some instances, an individual buyer may get a mortgage that includes money for renovating the home after closing. Occupant buyers are much more likely to ask for repairs or, alternatively, monetary concessions in lieu of repairs.
Every Buyer Has The Same Goal
All potential buyers have a motivation to buy at the lowest price possible. When there is an open competition, potential buyers can only win by making the best offer. Accordingly, wholesalers and, to a lesser extent, investors, would like to negotiate a sale before seller can get competing bids. Some of the "advantages" to selling to a wholesaler or iBuyer, such as "no showings" or "sell without listing" are simply techniques used by the buyer to make the seller think that it is an advantage not to know what others are willing to pay for the home. In fact, it is a major disadvantage that will significantly reduce the seller's net gain.
This is not to say that wholesalers and iBuyers are underhanded or that sellers should never consider that option. I've helped clients sell to both wholesalers and iBuyers when it made sense to do so. Sellers should just be sure that they are fully informed about the cost and benefits of this type of sale before moving forward.
If you are thinking about selling your home, Step 1 is obtaining a competent value estimate. Step 2 is formulating a plan. We can help!
For homes in the North Texas, we can generally provide an estimate and plan to you within 24 hours or less. To get the estimate and plan, please fill out the form below. The only required fields are the name (first name sufficient), address and email address (to which the plan and estimate will be sent); however, the estimate and plan will be more accurate if more fields are filled out. All information is strictly private.