Selling Your Home – Agent vs. House Buyer

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GET A CASH OFFER FOR YOUR HOME NOW

1 Address
2 Contact Info
3 Sale Details
4 Submit

You’ve likely seen billboards, signs, or other advertisements from house buying companies touting lines like “We Buy Houses for Cash.”

What does a House Buyer do?

A House Buyer is a common term used to describe a real estate investor. They’re also commonly referred to as Cash Buyers or Professional Buyers. A House Buyer is someone who buys houses to:

  • Fix and hold onto them as a rental
  • Flip them – which amounts to fixing them up and selling them to another end buyer
  • Or wholesale them – where they sell their interest in a contract for a home – also referred to as assigning – to another investor or 3rd party for a fee paid by said investor or third party separate from the sales price

Often times House Buyers are purchasing homes that are in some state of disrepair – such as flooded homes – or from sellers that are in some sort of distress – such as a seller who is about to have their home foreclosed on.

Since House Buyers are investors, they often purchase the home at below market value. In exchange for taking on the debt, effort, time, and risk, the investor has to make a profit. The price of the house and its needed repairs minus what the house will be worth once repaired is their gross profit. It’s important to understand it’s not their net profit as they investor will need to pay interest, closing fees upon the sale of the rehabbed home, and can incur other various costs and unexpected expenses.

What are some reasons someone may choose to sell a home to a professional House Buyer?

There are multiple reasons a homeowner may choose to sell to a Home Buyer vs. listing their home the traditional way. The below chart shows a comparison between the process and costs involved with selling your home via a traditional agent vs. selling to AMI House Buyers.

 AgentAMI House Buyers
Commissions
& Fees
Yes - 6% of the sales price is the average commission rate paid by Texas sellersNone
Closing CostsYes - Typically 2% of the sales price on average is paid by Texas sellersNone - We pay closing costs
Option PeriodYes - Usually 7-14 +/- days and the seller can back out for any reasonNone - We're buying as-is
InspectionYes - The seller may back out or want to renegotiate the price based on the inspection reportNone - We're buying as-is
Financing
Contingency
Almost alwaysNone - We pay cash
Sale of Another Home
Contingency
SometimesNone - Our offer has no contingencies
AppraisalYes - if it doesn't appraise, buyer may back outNone
Photograph
Prep
Yes - You need good photos for the MLSNone - We don't need photos
Average Days
on Market
57 days in the Houston area as of November 2018Immediate offer
Number
of Showings
It variesOne - us
Closing DateTypically 30-60 +/- days after accepting an offerWhatever date you choose and in as little as 10 days!
Who Pays RepairsNegotiableNo repairs needed
Heavily Damaged
Homes
Typically not able to get traditional financing without first being repairedNo repairs needed
Set Sales PriceMost buyers will try to negotiate a price lower than the list price and then attempt to renegotiate again after inspectionYes - We agree on a price and are buying as-is, so no additional attempts to haggle the price based on inspections, etc.
StressOne poll found that selling a house was more stressful than bankruptcy or divorceSimple & low stress

Obviously, there are a lot of benefits that come with selling your home to a Cash Buyer. In addition to the reasons shown in the side by side analysis above, House Buyers can also deal with special situations that make it tough or not possible to sell a home on the traditional market, such as issues with property taxes or a house that is in such disrepair that a traditional mortgage lender won’t lend on it.

But of course there are some drawbacks – or else everyone would use them. House Buyers have to be able to make a profit on the purchase, and therefore have to purchase the home at a discount.

The question a seller needs to ask themselves is if the benefits of selling their home to a House Buyer outweigh selling the home at a discount based on their personal situation.

Scenario breakdown

A common scenario where this might occur is with an inherited home. Let’s say three siblings – Jack, John and Jane – all inherit their mother’s home. Each sibling lives in a different state, none of them have the time, money, or desire to go to where the house is to find and secure an agent and get it ready and do needed repairs and improvements to put on the market. Nor do they want to have to turn on all the utilities or potentially wait months for the home to sell and deal with buyer negotiations.

Let’s take a look at this example scenario in more detail. The siblings’ mother’s would be worth $160,000 if it were brought completely to the top of the market (making it comparable to other homes obtaining top dollar in that market). The repairs to get it there would cost $20,000 and the siblings don’t want to put any money into the house. So, we’ll say that the current market value of the home is $140,000.

Market Value = $140,000Traditional SaleHouse Buyer
Negotiated Price$130,000$102,000
Agent Commissions$7,800None
Closing Costs$2,600Paid by House Buyer
Time until home was under contract120 daysImmediately
Time from contract execution til closing45 days10 days
Mortgage, taxes, insurance, and utilities during the time from under contract to closing$5,800$480
InspectionIssues arise and buyer now wants another $5,000 off the house, bringing the price down to $125,000None
Amount to Seller*$108,800$101,520

* Amount to seller prior to mortgage payoff.

In this scenario, the siblings would have made an additional $7,280 on the sale of the home by using a real estate agent. But Jack, John, and Jane decide that selling to a Cash Buyer will save them headache, stress, time, travel expenses and put cash in their pockets immediately – and that the advantages to them are worth taking $7,280 less than they could have made selling the home via traditional means.

Whether to work with an agent or a House Buyer doesn’t have a one size fits all answer. You’ll need to look at your specific situation and make the decision that works best for it.

If you’d like to get a no obligation offer, we’d be happy to give you one. Simply click here.
If you’d like to get a no obligation offer, we’d be happy to give you one. Simply tap here.

GET A CASH OFFER NOW

1 Address
2 Contact Info
3 Sale Details
4 Submit