Most people use a real estate agent to sell their home on the MLS. It is also possible to sell a home without a real estate agent and off market, meaning you do not use the MLS or even list the home for sale by owner. When you sell a home off market do not expect to get the highest price for your home, because you are eliminating many buyers. Investors are the main buyers for off market homes and they will want a good deal, because they are buying for cash and closing very quickly.
Buying houses below market value is my specialty, but I also sell many houses. I am a real estate agent, who sells houses for clients and I also sell my own fix and flips. When I sell houses I am looking to get the most money I can, but some people want to sell their house as fast as possible and for cash. Homeowners who need money right away, need to move right away or investors looking to wholesale a property have to have a cash buyer who can close fast. Although I don’t like to sell houses as fast as possible, I do buy them quickly for cash and off market.
What are the downsides to selling a house as fast as possible?
When I am flipping a house I want to sell it fast, but I also want to maximize my investment. Owner occupied buyers, who will be getting a loan are the buyers who will pay the most money for a house. I make sure my houses are in great shape and will qualify for a loan so I get the most money I can. When you want to get the highest price for a house, you will have to sacrifice a quick closing and a cash closing. When a buyer gets a loan it will take them from 30 to 45 days to close on a property after they put a contract on the property.
Not only does it take over a month for a buyer to close on their loan, but it takes time to find a buyer. If I list a home and I get multiple offers on the first day that indicates I priced the home too low. I don’t want to over price a home and let it sit on the market either, because that will cost me money as well. In my experience I will get an offer on one of my houses about three weeks after I list it if I priced it right. If I priced the home too high and I do not get an offer in one month, I will lower the price. The total process to sell a home for the most money takes at least two months and sometimes longer.
Why would anyone want to sell a house as fast as possible off market?
As a real estate investor I run into people who are looking to sell houses quickly and getting top dollar is not the most important factor. To many of us that seems crazy to sacrifice money for a couple of months time, but other people have more pressing priorities than money. Below I will explain a few people who need to sell houses right away and want to sacrifice money for time.
- Wholesalers: A wholesaler does not always have the money to buy a house and in all cases want to sell houses as fast as possible. A wholesaler will use a double close to buy and sell a house the same day. In order to buy and sell a house the same day you have to sell the home to an investor who has cash and can close right away. A wholesaler will also assign contracts they have to buy homes to other investors. They have a contract with the rights to buy the home and they sell those rights to an investor who has the cash to close right away. Many times these contracts are only good for 30 days or even less; that wholesaler has to find an investor who can close very quickly. Here is an article with much more information on wholesaling.
- Homeowners: I have bought many houses from owner occupants who needed to sell quickly. Most of these homes were for sale on the MLS and were priced very well. In most cases the home owners had not maintained the house well or bought the house in poor condition and never fixed it up. These houses could not qualify for a conventional loan, which made an investor the perfect candidate to buy the house. People want to sell houses quickly for many reasons; job transfer, health, starting a business, funding a business or they just need money. In some cases people don’t want to put their home on the MLS, because they don’t want people to see the condition of their home. An investor is the perfect person to buy houses quickly for cash, but they won’t pay retail value.
- Investors: Investors also need to sell houses quickly at times. Some investors have rental properties, but have moved away from that property. They are tired of renting the home from a long distance or paying a property manager, who doesn’t do a good job. Sometimes those out-of-state rental properties are more of a headache than an investment. The investor gets tired of losing money on the property each month and they just want to sell quickly. If a home is rented to long-term tenants it makes it more difficult to sell as well. Owner occupant buyers want to buy homes they can move into right away, not a home they have to wait for the tenants to move out of. Most owner occupants won’t be able to get a loan on a house with a current lease in place either. The investor who owns a home that is rented, will have to sell to an investor who will want a great deal. I have also bought properties that another investor bought to flip. The investor ran out of money or got in over their heads and they just want to get out as well. Partially finished flips are a great way for investors to get a good deal on a house.
- Inherited properties: I have also bought houses that were estate sales. In those cases the houses were not maintained or updated for many years. The heirs did not want to fix up the home or they just wanted their money as fast as possible. Probate homes are often sold off market and quickly for cash.
- Banks and institutions: Some banks and large institutions will sell large pools of properties off market to other large investors. Most of these pools are worth hundreds of millions of dollars and are not advertised as for sale. The buyers are large hedge funds or asset management companies. The advantage of selling large pools is that many homes are sold at one time, without the hassle of selling each property. Many investors claim to have access to large off market pools of properties, but in most instances they do not.
How much of a discount will an investor want on off market houses?
When an investor buys a house quickly with cash, they are not going to pay retail value. That investor either wants to flip the house or hold it as a rental. If they wanted to pay retail value they would buy the house off the MLS where they can get an inspection and a loan. For investors buying homes to wholesale, they will have to buy the house cheap enough to sell the home to another investor looking for a great deal and make some money for themselves as well.
Every investor has different criteria for what they will pay, but I want to buy houses at least 20 percent below current market value. If I am flipping a house I may have to buy it even cheaper (30 percent below market value), because of all the costs associated with flipping. 20 or 30 percent below market is a big discount, but if a house needs work and needs to be sold quickly a buyer will not get retail value. That 20 or 30 percent is not a discount off the repaired value of the home, but it’s value in its current condition. However, when buying homes off market, the seller usually does not have to pay a commission to a real estate company, which will save them money over listing in the MLS.
How are properties bought “off market” by investors?
Many investors are having a hard time finding great deals in today’s hot real estate market. One way to find deals is to buy houses from motivated sellers that are not listed in MLS. Investors find motivated sellers by using direct marketing, which involves letters, bandit signs, websites or billboards. If you see signs that say “we by houses, any condition, we pay cash” that is an investor looking to buy homes cheap or a wholesaler looking to buy homes cheap.
The advantage of selling a house off market is the home is never in MLS and most people will never know it sold. Real estate agents are also not involved which will save money on commissions. A home owner will not make as much money selling off market as in the MLS, but it isn’t always a massive loss because they save money on these fees.
How can a seller find an investor to buy their house quickly?
Not only are people looking to sell houses quickly for cash, there are investors looking to buy houses cheap for cash. They do not always find each other, because the investor cannot market to everyone. If a homeowner does not want to list a home in MLS, their best bet is finding an investor and selling the home off market.
The easiest way to find an investor is to find the bandit signs, billboards or advertisements on Craigslist that say we buy houses for cash. The tricky part is many of those signs and advertisements are from brand new wholesalers or investors who might not have any idea what they are doing. Many direct marketing deals fall apart, because the wholesaler cannot find a buyer for a home they have under contract. If you are a seller looking to get rid of your home quickly for cash, fill out the information below and I will get back to you with any investors I know in your area.
Selling a home off market is not the way to get the highest selling price for your home, but it is a way to sell you home quickly for cash. There are some shady investors out there who try to steal homes from off market sellers, but for the most part an investor has to buy homes very cheap for it to be worthwhile to buy off market properties. I buy off market homes in the Northern Colorado area and I am also a real estate agent. I have to disclose that I am an agent and that I may be buying a home below market value when I buy an off market property. If the sellers and buyers both understand the pros and cons of off market transactions it can be mutually beneficial.