It’s no secret that we’ve been living through one of the most historic real estate runs of our lifetimes during the last five-plus years. With tight inventory and historically low interest rates, sellers have capitalized on the fundamentals of supply and demand by tapping into the windfall of appreciation that this market has produced.
There is also a multitude of real estate investors that have capitalized handsomely on opportunities in this market. Fixing up and “flipping” homes has become increasingly popular and can be a lucrative business for investors. Sellers can oftentimes be attracted to the potential ease of selling to an investor for a quick sale, but is this always in a seller’s best interest, and are they potentially leaving big bucks on the table?
Working with an investor does have its advantages. The primary advantages are convenience, ease of sale, and potentially shorter time frames to close the sale. “Flip” investors generally purchase properties with all cash and take the home “as is,” with any repairs and deferred maintenance that comes with the property. Selling this way eliminates having to prepare and show a property to multiple buyers and also eliminates any commission associated with having an agent involved.
However, investors are in business for the sole purpose of making money and maximizing profits. It’s all about the bottom line. With this in mind, the downside to working with an investor is that they generally look to purchase properties at a minimum of 15-30 percent below fair market value. Purchasing the property at the lowest price possible enables them to make any necessary repairs and “flip” the property for a handsome return on their investment.
In some instances, a home may have too many issues with the internal “systems” for the average buyer to consider. A property in serious need of attention to foundation, electrical, plumbing, roof, heating, or undesirable floorplan can turn many buyers away. This is where an investor sale may be a seller’s best bet for unloading a neglected property. However, in most cases, a seller can maximize profits on what may be their largest financial investment by putting forth the effort to effectively prepare their home for sale and maximize exposure on the open market.
Let’s say a home needs a number of repairs or is in need of cosmetic improvements, but you, as a homeowner, have no idea of where to start. An important first step is to bring in a successful real estate agent, or team, with a proven track record to assist and oversee the sale. A real estate agent/team will meet for an initial, no cost consultation. They will provide market statistics and valuable insights on current market conditions. They can also assess the condition of your home and recommend the most effective repairs and cosmetic improvements that will maximize the marketability of your home. Further, your agent/team should be able to provide contacts and assist in coordinating any repairs or improvements that you choose to make to your home.
In many cases, a home just needs a little paint, landscaping, and a thorough decluttering/cleaning, which will enhance marketability, maximize seller profits, and protect your valuable investment. Finding a local charity to donate household goods to (e.g., Beacon House, Salvation Army, etc.) or selling them through apps like OfferUp are easy ways to start the purging process. In our current market, we are seeing homes sell faster and often times with multiple offers above the asking price. By not exposing your home to the open market, you may be doing yourself a huge disservice. Buyers are out there, and you will never know the true value of your home until you test the open market with professional marketing and an effective sales strategy that can be provided by a real estate professional. spt