10 Myths about Real Estate Investors

10 Myths about Real Estate Investors

When most people think of real estate investors, they are reminded of the signs posted along the side of the road that say, “We Buy Houses!” Others think about the various televisions shows that have popularized the home flipping industry.

Do those people represent your average real estate investor? Yes, and no.

While they are both forms of real estate investors, they are not the only ones. Selling your home to an investor can mean a wide variety of things, and may present with different opportunities. Before you discount an offer by an investor, don’t let these 10 myths hold you back.

Myth 1 – Investors Won’t Offer Me a Fair Price

Working as an investor is a for-profit business. However, this does not mean they will treat you unfairly. A reputable investor will offer you a fair price based on your homes current condition. Additionally, they tend to offer payment in cash, and may purchase the property as-is without contingencies or inspections. This can make the entire process very quick, which may be ideal depending on your personal circumstances.

Myth 2 – Investors Act Unethically

The majority of investors are ethical in their dealings. As with any other industry, there will be a few who do not act as they should. Before working with an investor, take the time to research their background just as you would with any other business you were inviting into your home. Check the investor’s website and search for a record at the Better Business Bureau. You can also search through various review websites to see what others have said about their experience with the investor.

Myth 3 – Working with an Investor Means I Will Lose Money

In reality, working with an investor can save you money. The home is more likely to be bought as-is, and you will not need to update your property to meet the standards of a potential buyer’s mortgage lender. You also won’t owe a realtor commission if the purchase is handled directly with the investor. Even if the purchase price offered is lower than you may receive on the open market, the avoidance of other expenses may let you come out ahead.

Myth 4 – An Investor Won’t Pay Off My Mortgage

In a “fee simple” sale, all mortgages and liens are paid at the time of purchase. “Deed Subject To” or “Contract for Deed” sales do not immediately pay off the mortgage. Instead, the investor assumes the payments while the mortgage remains in your name. You can choose to require the mortgage be paid in full as part of the sale by handling the sale as “fee simple.”

Myth 5 – Working with an Investor is Not Faster than Working with a Realtor

A sale on the open market requires marketing your home and waiting for a buyer to step forward. A traditional buyer may have contingencies and requests that are not present with a sale to an investor.

Sales to an investor can be much quicker. You working directly with the investor, and the sale will likely be in cash with the property being sold as-is. This eliminates waiting for the potential buyer to finalize their loan, as well as time for any repairs.

Myth 6 – Repairs Are Required to Sell to an Investor

Most investors buy properties as-is. This means no inspection, no appraisals, and no repairs. Investors target homes that need repair, as this allows them to profit on the home. Since they are entering the deal with that mindset, it is unlikely that repairs will be required.

Myth 7 – Selling to an Investor Involves Hidden Fees and Commissions

Investors tend to buy direct, meaning no middle-men are involved in the sale. If you work with a real estate agent, a commission will be required. When an investor purchases a home directly, a real estate agent is not involved. This means no costly commission. Additionally, few investors try to add in any fees. Instead, they offer a fair price based on what they feel your home is worth today.

Myth 8 – Investors Back Out on a Whim

Investors who have worked in the field for some time, and are part of a financially stable enterprise, are unlikely to back out of a sale once an offer is made. Not only could this damage their reputation in the community, it is also wasted time of their part. Generally, an investor will not make an offer unless they are truly willing to honor it.

Myth 9 – Investors have Contingencies

Experience investors buy properties as-is, meaning they will not require you to make any repairs.  In addition, since most investors are cash buyers, they won’t have a finance contingency like a traditional buyer who needs to obtain a loan to buy a house. They are not emotionally invested in the purchase, and are confident in their ability to assess the value of your home effectively.

Myth 10 – Negotiations with an Investor will Take Forever

Not exactly.  In fact, experienced investors tend to negotiate quickly as this supports their business objectives. This leads them to offer you a competitive offer right from the beginning. While some negotiation can occur, it is rarely a lengthy process.  If an investor runs their operation like a business, they understand time is money, and, therefore, don’t like to waste time.

Wrapping it Up

Investors understand that reputation is everything. If you have a positive experience, you are more likely to tell friends and family should they need to sell a home quickly. Don’t let these myths hold you back from giving this form of sale a try. You may be pleasantly surprised. 

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