How Much Will An Investor Pay For My House

by | Dec 6, 2023

Let’s skip to the chase.

Investors will pay up to 70% of the ARV (After Repair Value) for a home. Investors, as their name suggests, have one goal.

Making a profit.

If you want to sell your home for 100% of its current value, then selling to an investor may not be for you.

However, you wouldn’t be exploring your options if you didn’t know…

  • How stressful preparing your home for a traditional sale can be, especially with the numerous demands you’ll face to prepare it for listing.
  • How selling your home traditionally can be a drain on your time and finances.
  • How selling your home traditionally is invasive, as you let people into your home and sometimes have to vacate to keep it “showing ready.”

Investors typically buy homes ‘as-is,’ eliminating the need for costly preparations and the discomfort of frequent showings, offering a more streamlined, stress-free selling experience.

If you’ve reached a crossroads or already foresee an inconvenient road ahead, you may consider selling your home to an investor. If that resonates, you probably wonder, “How much will an investor pay for my house?”

As we said, they’ll rarely pay more than 70% of the ARV.

But how do they come to that number?

The rest of this article will answer the following:

  • What is a real estate investor?
  • Why would they want to buy my home?
  • What formula do real estate investors use to calculate value?
  • What should I do to get the most money for my home?

What Is A Real Estate Investor?

As real estate investors, we encounter homeowners in many unique situations. 99% of the homeowners who choose to sell their house as-is fall into one of these five categories.

  1. They just inherited a new house and want to sell it quickly (often because they need the money and not the headache).
  2. They’re going through a divorce, and either need to sell the house due to a court order or to recover financially.
  3. They’re a landlord who needs to get rid of a property that’s costing them more than it’s worth (usually due to bad tenants or a sharp increase in property expenses)
  4. To avoid losing their home to foreclosure and get equity out of it.
  5. The property is unlivable and requires extensive repairs.

Why Would They Want To Buy My Home?

Firstly, investors look for properties they can purchase at a lower cost, renovate, and then sell for a profit, a process known as “flipping.” If your home needs repairs like foundation repairs or updates, it could be an attractive option for this kind of investment. From your perspective, the more repairs your home needs, the less offers you’ll receive. Most buyers want move-in ready homes.

Secondly, your home might be in a desirable location. Take this Australian family, that refused to sell their property to developers, who built a neighborhood around it. Now, it’s estimated to be worth $33 million. We’re not saying you’re in for a similar fortune. Just know that traditional homebuyers comprise only a part of the real estate market.

Another reason is due to specific seller situations. You won’t have time for a traditional sale if you need to sell your home fast due to a foreclosure, divorce, or relocation. In this case, you can sell your house as-is, meaning they won’t ask you to make any repairs or upgrades before selling.

Related: How Long Does It Take To Close On A House With Cash

Factors That Affect The Price

  • Condition: Investors will factor in the cost of repairs and renovations needed to bring it to living conditions and make it competitive in the local market.
  • Square Footage: As the saying probably goes in real estate, “size matters.” More living space means more rooms, functionality, and appeal to the market.
  • Location: We can say for certain that there is a saying that goes, “location, location, location.” If you have the worst house in the best neighborhood or foresee development in your area, don’t hesitate to ask for more.
  • Occupant Status: Whether or not the buyer has to deal with current occupants will affect the price. I’ve heard stories of investors paying tenants up to six figures in California to vacate a property.
  • Leins: Investors sometimes shy away from properties due to unpaid contractors, medical bills, or taxes.
  • Speed Of Transaction: If you needed to sell your house yesterday, then investors will ask for a discount to facilitate a speedier transaction.
  • Demand: Any of the reasons above can increase or decrease the demand for your property. For example, selling your home off-market may reduce demand, thus reducing your bargaining power.

To get the most out of your home sale, increase the curb appeal, make easy repairs, and market market market.

Our Formula

We have a formula to break down how to determine the value of properties we buy. You can use this formula to determine the value of your home as a seller.

Let us break the formula down for you in simpler terms.

ARV (After-Repair Value) – This is the market price of your home after we buy it, fix it and go to sell it. This price is calculated based on the recent sales of similar houses in your neighborhood.

COR (Cost Of Repairs) – This is the amount that we estimate that it will cost us to fix your house after we buy it to get it to market value. This can include a new roof, siding, kitchen and bath remodels, electrical and plumbing updates, painting, flooring, etc. Buyers expect renovated homes to be brought back to life to match the modern homes in the neighborhood and we must make the necessary updates to keep them happy!

SC (Selling Costs) – This is the amount it will cost us when we resell your house after we fix it. When we resell your house we will have to pay those ugly realtor commissions and closing costs that you avoided by selling to us. We also factor in our minimum profit here as well. Unfortunately, we are a business and need to make money to keep helping homeowners in time of need!

Now You Know: How Much An Investor Pay For Your House

If you’re comfortable waiting for the best offer, don’t hesitate to talk to multiple investors and even work with an agent. You’ll almost always benefit from more people knowing your property is for sale.

Pro Tip: Attend the inspection to ensure the inspector does a thorough job. It should last 2-3 hours. Tell the inspector your plans for the property (move-in ready vs. fixer-upper) and read the full report. 

Massachusetts-Specific Home Requirements

  • Title 5 Inspection: Massachusetts requires a Title 5 inspection for properties with private septic systems. This inspection ensures the septic system meets state environmental standards and must be done before selling a property, expanding its footprint, or building additional bedrooms.
  • Lead Paint Law: Massachusetts requires homes built before 1978 to be inspected for lead paint. If lead is found, it must be disclosed, and landlords must remove or cover lead paint hazards if a child under six resides in the property.
  • Smoke & Carbon Monoxide Detector: Before a property can be sold, it must pass an inspection to ensure compliance with Massachusetts’ smoke and carbon monoxide detector regulations. Certificates from local fire departments are required at closing.
  • Transfer Tax (Stamp Tax): Massachusetts imposes a real estate transfer tax on property sales, commonly known as a stamp tax. The tax rate is $2.28 per $500 of the purchase price, paid by the seller at closing.

Step 8: Homeowners Insurance

Homeowners insurance is mandatory if you have a mortgage and must be in place before closing. This insurance covers various risks, including damage from fire, theft, and natural disasters, as well as liability for accidents on your property.

Standard policies often include dwelling coverage, personal property coverage, liability protection, and additional living expenses if your home becomes uninhabitable.

There are different levels of coverage, such as:

  • HO-1: Basic policy covering specific perils.
  • HO-2: Broad policy covering more perils than HO-1.
  • HO-3: Special policy that covers all perils except those explicitly excluded.
  • HO-5: Comprehensive policy offering the most extensive coverage.
  • HO-6: Condo insurance.
  • HO-7: Mobile home insurance.
  • HO-8: Older home insurance.

By comparing different policies and providers, you can ensure you get the best protection for your new home.

Step 9: Closing And Walkthrough

The final walk-through typically occurs on the closing day to ensure the property is in the agreed-upon condition. During this inspection, confirm that all personal items have been removed unless specified otherwise in the contract, and check for any new damages. Conduct the walk-through during daylight hours for better visibility. 

Be thorough:

  • Flip all switches
  • Turn on faucets to check for leaks
  • Run all appliances
  • Test the garage door opener
  • Open and close all doors
  • Flush toilets
  • Run the garbage disposal and exhaust fans
  • Inspect ceilings, walls, and floors.
  • Test the heating and air conditioning systems.

At The Closing Table

You will review your Closing Disclosure form at closing, which you should receive three business days before closing. Compare it with your Loan Estimate to check for major changes or inconsistencies. Some fees are legally restricted from increasing by more than 10%.

Consider having a real estate attorney review these documents if desired.

On closing day, meet at the title company. Being on time is crucial, as appointments are often scheduled back-to-back. Bring your photo ID, a cashier’s check (if required), Closing Disclosure, and any other requested documents. 

During the closing, you will sign several key documents:

  • Closing Disclosure: Details all the costs and fees associated with your mortgage, received at least three business days before closing for review and comparison with your Loan Estimate.
  • Promissory Note: A legal document where you agree to repay the loan amount over a specified period, including the interest rate and payment schedule; your promise to pay back the loan.
  • Mortgage (or Deed of Trust): Secures the promissory note and gives the lender a claim against your home if you default on the loan; outlines the mortgage terms, including the loan amount, interest rate, and repayment terms.
  • Deed: Transfers property ownership from the seller to you; includes a property description and is signed by the seller.
  • Settlement Statement (HUD-1 or ALTA): Provides a detailed list of all costs associated with the home’s sale, including buyer and seller costs; reviewed and signed by both parties.
  • Affidavits: Various affidavits may be required, such as confirming your identity, stating the property will be your primary residence, or ensuring no undisclosed liens or judgments.
  • Title Documents: Ensure you receive clear title to the property; may include documents related to title insurance, which protects you and the lender against potential legal issues with the property’s title.
  • Initial Escrow Disclosure: This document outlines the escrow account details, including the amount you need to deposit and what it will cover (e.g., property taxes and insurance).
  • Loan Application: Review and sign a final version of your loan application to confirm that all information is accurate and up to date.
  • IRS Form W-9: Used to provide your taxpayer identification number to the lender for reporting interest paid on the mortgage.
  • Homeowners Insurance Verification: Proof that you have secured homeowners insurance for the property, typically required by the lender.

Get One-on-One Guidance

Contact us below or call (978) 228-1068 to speak with us about selling your home fast.

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Elie Deglaoui - Author

Author

Elie Deglaoui

Elie is our office admin who handles all our day-to-day tasks and makes sure we always stay on track. He brings his love of music and sports into the office everyday to always liven up the environment. His outgoing personality makes it easy and fun for him to talk to homeowners, homebuyers, and everyone in between.

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