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.
- They just inherited a new house and want to sell it quickly (often because they need the money and not the headache).
- They’re going through a divorce, and either need to sell the house due to a court order or to recover financially.
- 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)
- To avoid losing their home to foreclosure and get equity out of it.
- 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.
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.
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.