How much an investor might pay for your house will vary greatly, but when I pay cash for a house you can usually expect to get paid about 75% to 80% of the value of your house. This is just a guideline because the percentage of what I can pay will go up with smaller less expensive home. “How much will an investor pay for my house” is a question people ask that inherit a house or have a house with overwhelming home repairs waiting to be done. Sometimes people in foreclosure decide selling their home is the best option for them.
The current real estate market we are in will also play an important role in how much an investor can pay for your house. Our current market is characterized by interest rates that are slowly trending downward with continued slower home sales than what is typical.
What is LTV and What Investors Look For My House
In my career as a real estate investor, I’ve always paid close attention to a metric known as the Loan to Value ratio, or LTV. This ratio, expressed as a percentage, is calculated by dividing the loan amount by the appraised value of the property. It’s a crucial measure that helps me determine the risk involved in a property transaction.
When I’m considering buying a house for cash, I typically look for properties where the LTV is between 50% and 75%. But why is this the case?
First, buying properties at a lower LTV gives me more equity in the property right off the bat. Equity is the difference between the property’s value and the outstanding loan balance. Having a high equity stake means I have a buffer against potential market fluctuations. If property prices decrease, I have some room before the investment becomes underwater, where the loan is higher than the property’s value.
Second, properties with a lower LTV ratio offer better opportunities for refinancing. If I decide to refinance the property in the future, a lower LTV can provide more favorable loan terms and interest rates.
Finally, an LTV of 50% to 75% gives me room for improvements and unexpected expenses. As an investor, I need to be prepared for potential repairs or upgrades to make the property more appealing to potential buyers or renters. With a lower LTV, I have more financial flexibility to handle these costs.
In essence, a lower LTV represents a safer investment from my perspective. It gives me a stronger equity position, better financing opportunities, and greater financial flexibility. This approach allows me to better manage the risks of real estate investing and ultimately, aids me in delivering high-quality properties to the market.
Three Main Types of Home Investors
An investor is someone who buys your home, looking to make a profit out of your property down the road or right away. There are different types of investors, however, and it’s important to know who you are working with before you sell your home:
Real Estate Wholesalers
A wholesaler investor isn’t the ideal type of investor to work with to experience a personable, customized transaction for your circ*mstances. Real estate wholesalers are usually an individual or group of investors who get your home under contract in hopes of them finding another investor to “flip” the contract to in exchange for a fee. While there is nothing illegal about this it can put you in a less-than-ideal situation as a home seller. Wholesalers don’t always disclose that they are looking to sell the contract to another buyer and if they are unable to find that buyer before closing then they might not follow through with purchasing your home.
If you work with a wholesaler who is upfront and transparent then there is no reason why you shouldn’t work with them or dismiss them right away. Make sure to ask a lot of questions about their plans for the property and their ability to close on the property.
Out of State Real Estate Investors
If you are approached by an out-of-state investor it could mean they are a wholesaler or are a cash buyer (read more below). When working with someone from out of state it’s important to look for these factors:
Are they willing to buy your home in as-is condition?
Do they require a home inspection?
Are they paying cash? (this means they could close in a week and ask them to provide proof of funds)
If not paying cash, do they already have a relationship with a good local title company?
How quickly can they close?
Unfortunately there are untrustworthy investors out there who would take advantage of your situation, making an offer on your home while really hoping to re-negotiate later when you are under contract and feeling pressure to close on your home. As with wholesalers, ask lots of questions and do your due diligence — a trustworthy investor should have references or happy clients he can refer you to to vouch for his business, especially when working with an out-of-state investor.
Local Cash Buying Companies
This third type of investor is usually the most trusted and easy to work with. When working with an investor there is certain criteria that should be met and local cash buyers often check all those boxes:
- A local cash buyer type of investor should already have the cash to buy your home. This means no waiting on financing and approvals from the bank, the cash offer is good to go.
- A local buyer who makes a living as a real estate investor will usually have a representative (or themself) that can come to your home or meet with you to make a fast cash offer. No need to meet with a third-party contractor or inspector to look at your home, the local investor will work with you personally.
- Local cash buyers purchase homes in as-is conditions. These types of buyers don’t require contingencies in the offer.
- Closing is quick with local investors. Ask if they can close this week and ask for proof of funds.
- A local buyer will already have an established relationship with local title companies, that relationship can help the process go smoothly and quickly.
A lot depends on what type of investor you talk to. So who do you call?
How to Find an Investor to Buy My House
Sometimes an investor will reach out to you, other times you can do a google search for house buying companies in your area to find an investor to buy your house. Just remember to make sure that an interested investor meets all the following criteria to ensure that the process of selling your home benefits both you and the investor:
- Someone that already has the cash on hand
- Someone that will buy the home AS-IS (no contingencies and outside appraisals)
- Someone that can work with you directly and give you an offer on the spot
- Someone that understands the Utah market and works with a local title company
- Someone who is transparent with you and discloses everything (especially if they are not going to buy the home themselves, but try and wholesale it!)
- Someone that can close quickly (in a few days), or whenever you are ready
So now that you know what to look for in an investor, the big question remains:
How Much Will an Investor Pay for My Home?
In general an investor is looking to make a 10-15% profit from an investment home. This profit comes after any money spent on remodeling and maintenance and associated costs with selling the property. If you feel like you are getting low-balled by an investor, you might not be — they can’t offer the going rate on a home, spend money remodeling it and then lose money.
The upside is that the investor usually plans on improving the home which will increase the potential selling price of the home. Their offer can be based on the value the home will have AFTER they have remodeled the home. The After Repair Value is the amount of money they hope to receive by improving and selling the home for top dollar. If you are in a hot market then an investor can take more risks while a slow market might prompt them to be more conservative in their offer.
The current real estate market conditions are rising interest rates and very slow home sales. And, add to that decreasing home prices. There are two main reasons for this. Rising rates are pricing some people out of the market, and home owners with low interest rates find it difficult to consider selling because of a low interest rate they already have. It is possible that prices may continue to drop a little. However, no one has a crystal ball to know for sure. So you can see, when asking, “how much will an investor pay for my house”, there are a lot of factors that add to the answer because of the market uncertainty.
7 Home Selling Negotiating Strategies With Investors
- Know the Real Value of Your Property: Understanding your property’s real value is the first step in negotiation. If you’re well-informed about recent comparable sales in your area, the condition of your property, and the current market trends, you can make a strong case for a higher price. As an investor, I appreciate a well-reasoned argument, and I’m always open to discussions.
- Highlight Property Strengths: When negotiating, highlight the unique strengths or features of your property. These could include recent renovations, a desirable location, or unique architectural features. Anything that adds value to the property should be emphasized. Remember, I’m looking for value-add opportunities, and your property’s unique strengths might be just that.
- Show Flexibility with Terms: Sometimes, being flexible with the sale terms can help you secure a better deal. This might mean being flexible with the closing date, agreeing to handle some repairs, or being willing to lease back the property after the sale. In my experience as an investor, I’ve found that transactions where both parties show flexibility often lead to a win-win situation.
- Stay Emotionally Detached: This might seem counterintuitive, but staying emotionally detached during negotiations can work to your advantage. The more you can approach the negotiation as a business transaction, rather than an emotional event, the better you’ll be able to advocate for your interests. As an investor, I respect homeowners who approach the process with a level-headed, business-minded perspective.
- Provide a Home Inspection Report: Before negotiating, consider getting a home inspection. This report can provide a clear picture of the property’s condition, pointing out any necessary repairs or potential issues. By doing this, you’ll show transparency and good faith, which could prompt me as the investor to be more flexible in my offer.
- Offer to Cover Closing Costs: Although it’s not typically the seller’s responsibility, offering to cover some or all of the closing costs could potentially make your property more attractive to cash buyers. It reduces the upfront cost for me, potentially freeing up more money that could be used to increase the offer price.
- Showcase the Potential of the Property: If your property has specific potential for improvements or expansions that could significantly increase its value, make sure to highlight this during negotiations. Maybe there’s room for an additional bathroom, or perhaps the basem*nt could be finished for additional living space. As an investor, I’m always looking at how I can add value to a property, and these insights could justify a higher purchase price.
Remember, negotiation is a two-way street. As an investor, my goal is to reach an agreement that respects and meets your needs, as well as mine. By employing these strategies, we can work together towards a deal that benefits both parties.
How to Start the Process to Sell Your House to an Investor
When you reach out to Gary with Gary Buys Houses you are working with a trusted, local, cash buyer who fits all the criteria of what to look for in an investor! Gary can offer a fast cash offer and close in as little as a week and he’s been buying homes here in Utah for more than 12 years. You can feel confident about working with a real estate investor to sell your home — in any condition — when you work with a local investor like Gary. Contact Gary here and find out how much he will pay for your home today!
