Most real estate investors I know are good and honest folks who are working hard every day to make a living and provide for their families. But just like in any industry, there are a few that have less than honorable intentions. I have seen families lied to, contract prices renegotiated at the last minute, fake earnest money receipts and made up bank statements. I have even seen families who were tricked into signing over the deed of their home! Real estate investors are not regulated and do not have a license or any special certification. It is therefore important that you do your homework. You should only work with people and companies who are legitimate and have above board reputations that can easily be verified with a simple google search.
When you sell to a real estate investor, the first thing you need to understand is that you are selling your home BELOW market value. You are exchanging convenience and time with a discounted price. There is nothing wrong with doing this. Millions of people decide every day to pick up milk at 7/11 instead of stopping at a grocery store where the milk is priced considerably lower. Why? They are willing to pay the increased price. This is so they don’t have to fight traffic, park 20 yards away, walk to the back of the store and then stand in line to check out. In the same way, typical homeowners who sell to real estate investors do not want headaches. They are trying to avoid real estate agents, multiple showings and appointments, inspections, appraisals and so forth. They are willing to accept a reduced price for their home in exchange for the fast closing and ease of transaction.
But what is not OK is when a real estate investor shows up to a home and claims that they are, in fact, giving you market value. Believe me, there is no real estate investor who is paying cash and closing fast that is willing to pay full market value. It just doesn’t happen. If someone says otherwise, that is a huge red flag.
Out of Town Buyers
Another red flag to consider are big, out of town companies as buyers. Not all, but most are notorious for a bait and switch tactics where they offer high contract price, but the price is contingent upon an inspection. Once they get the inspection, they proceed in re-negotiating the price; often times days before closing. I have had many call backs from sellers where the out of town company out bid me by $20,000, but after they received their inspection, they ended up re-negotiating their offer price well below my original offer. Don’t fall for this. A professional real estate investor should be able to give you an offer that IS NOT contingent on an inspection.
Next time I will discuss what steps you can take to minimize problems when selling to a real estate investor.