The Ultimate Guide To Selling A House Fast In 3 Steps
Selling a house fast might be the best option for certain people. This route has been growing in popularity in recent years as people realize how quick and straightforward the process can be. However, there is very little attention devoted to this topic, and the available information can be misleading.
For this article, the definition of selling a house fast is when someone sells their property in its current condition directly to an investor, in a private transaction. This is far different from when someone sells their property with a realtor who lists it on the market.
The latter is the traditional way that properties are purchased and sold, yet it may not be the best option for everyone.
Before getting into the steps, I want to go over the traditional way that properties are sold and why it may not be the right move for everyone. If your mind is already made up that using a realtor won’t benefit you, scroll down to get into the steps!
Realtors Are Not Always Best For Selling A House Fast
According to a 2020 study done by the National Association of Realtors, 89% of sellers were assisted by a real estate agent when selling their home. This leaves 11% of sellers that did not use a realtor.
Selling a house fast in its current state (as is) might not be the only way the 11% of non-realtor sellers are doing it. Some are family sales, others simply do not want to use a realtor, and many more reasons why this occurs.
5% Of All U.S. Home Sales Are Done “As Is”
Year over year, we conservatively estimate that about 5% of sellers go about selling a house fast without updating or renovating it. Typically this is done directly to an investor. The table below shows the number of residential property “flips” annually from 2010-2018:
As you can see, the percentage of house flips relative to the total home sales has steadily been around 4%. This does not account for houses sold as is that are then used as rental properties. Therefore, year in and year out, we conservatively estimate that 5% of houses that are sold each year are sold as is.
Every year in the U.S., 5,000,000 – 6,000,000 houses are sold. Therefore, the 5% of homes sold as is would be somewhere in the 250,000 – 300,000 range. Over the years, there has been a vast amount of innovation and information in the traditional real estate space.
Zillow, Redfin, Opendoor and several other online resources have greatly improved this process for most people. I say most people because the 5% of people that are selling a house fast have been somewhat neglected.
The pie chart below shows the “real estate pie,” and you’ll see some familiar names all working in the 95% portion of the pie, but there isn’t much in the 5% portion:
The traditional way someone sells their property is by contacting a real estate agent, and they list the property online and attempt to sell it. Realtors are paid a commission for doing this somewhere in the 4-6% range (based on the sale price).
An Interesting Study On Realtor Commissions
A very interesting and entertaining economist published a book called Freakonomics in 2005, primarily about incentives and how incentives determine what decisions people will make. One of the topics he examines is real estate agents.
By looking at many transactions in the Chicago area the study summarizes that real estate agents consistently sell their properties (that they own personally) for a higher price than their clients’ properties. Here is the video summarizing this.
He chalks this common outcome up to the incentive structure for real estate agents. In the video, he explains how an increase of $10,000 to the sale price, which would greatly help the seller, does not equate to much for the real estate agent, so they are more incentivized to urge their client to accept an offer quickly, than to wait for a higher offer price.
The Realtor Commission Model Is Outdated
This study is more than 15 years old; however, the business model and how real estate agents are paid has remained the same for the most part. During this same period, the available information has grown exponentially with the rise of the internet.
This available information has reduced the value that a realtor provides as an expert because anyone can easily access this information online on their own. Realtors used to have to do lots of work researching properties, finding comps, and accessing information that was difficult for the general public to see.
These days, all this information is straightforward and easily accessible with a simple Google search. So, with all this information at our fingertips and the value a realtor provides having been diminished, why have commissions not come down relative to this?
Realtors Might Not Bring The Right Buyer To Those Selling A House Fast
I am by no means against realtors. I just think someone’s situation should be closely examined before deciding to use one. The purpose of selling a house fast for many people is to do it quickly with minimal effort.
When a realtor lists a property online, they will often recommend doing repairs and updates prior. And even if they list it without any repairs or updates being done (as is), the buyer pool that makes up this market is primarily focused on buying “retail” properties.
Retail buyers are not experienced property investors and are not focused on houses being sold as is. Some will watch HGTV and get excited about a “fixer-upper” until they realize what they are getting into.
Back in my mortgage lending days, I saw on multiple occasions where an inexperienced buyer would get excited to buy a fixer-upper only to cancel the contract once the excitement wore off and reality set in.
Buyers that fall into this category should certainly be avoided when selling a house fast. But there is an even worse type of “buyer” than this. They are known as real estate wholesalers.
Avoid These “Investors” At All Costs!
Check out this article to get an in-depth understanding of what a wholesaler is and why to avoid them. Wholesalers are fake real estate investors who falsely advertise that they are the best for selling a house fast; however, they are far from it.
Wholesalers act as buyers and therefore avoid almost all regulation, however some cities and states are cracking down on this shady practice as more and more sellers are negatively impacted by it.
The Real Estate Wholesaler Model And Why To Avoid It
Once someone agrees to sell their home to a wholesaler, the signed contract will then be assigned to an end buyer at a marked-up price. For instance, if you agree to sell your property to Johnny Wholesaler for $150,000, they will then assign their contract to Bob Buyer for $200,000.
Bob Buyer is the one who ends up purchasing your property, and Johnny Wholesaler walks away with $50,000 that should have been in your pocket.
This is the best-case scenario, as crazy as it may sound, because often wholesalers will not find a buyer for the property and will end up canceling the contract. This has left many sellers in a much worse spot than when they started the process.
The 3 Steps To Selling A House Fast – Direct To An Investor
We have touched on some common reasons people choose selling a house fast over the traditional way, how it has grown in popularity recently, and some things to avoid once you decide to sell your house in this manner.
Assuming that you have decided that selling a house fast directly to an investor is the right move, you’re now ready to get into the three steps.
Step 1: Determine The Things That Are Important To You In The Transaction
All of our situations are different, and we all have different needs when selling a property. What is essential to some may be of little importance to others, and vice versa.
For instance, someone might have a good bit of equity tied up in their home and need to access it to move. In this example, doing a quick sale followed by a free rent back might be the best route to take. By closing on the house quickly, they can put cash in their pocket. And by doing the free rent back, they can continue living in the property after the sale. By doing it this way, they do not get uprooted, and are not forced to find a temporary place to live.
Another term that may be important to someone is an agreement where the seller can leave all trash behind at the property for the buyer to take care of. This makes it much easier and cheaper when moving, not to have to deal with any of this.
Price should be important for everyone when selling a house; however, if it is the ONLY thing that is cared about, I recommend not selling a house fast to an investor. By selling a home directly to an investor, you don’t always get the absolute highest price possible. In some cases, you can when there is a substantial competition created amongst investors, but you’ll be exchanging price for a smooth and painless transaction most of the time.
If you were to update and renovate the property, you’d likely sell for a higher price, even when factoring in the costs of doing the updates. But this is exactly what people selling a house fast look to avoid, and they’re okay with a slightly lower price in exchange for not having to do all of this work.
Example 1: Fred And Susan The Married Couple
Let’s take a look at a fictional example of a couple named Fred and Susan:
Fred and Susan live in Manassas, VA. They have lived in the same house for 25 years. They have made lots of memories in this home, but they plan to start a new chapter by moving to Atlanta to be closer to their kids and grandkids.
Over the years, the property has become more challenging to maintain and update, so some critical maintenance and repairs are needed. The house is paid off; however, they are both on fixed incomes and don’t have much savings.
They’ve also let the home get somewhat cluttered over the years, which further complicates their move. There are many items they want to take with them but they wish to leave most of it behind. Since Fred and Susan have family in the Atlanta area where they plan to move, they want to move there as soon as possible and live with the family until they find a place.
After doing some research about selling a house fast to an investor, Fred and Susan determine there are three critical things to them in this transaction:
(1) A quick settlement – since Fred and Susan are not flush with cash at the moment, doing a quick settlement will allow them to unlock the equity in their house and put it in their pockets.
(2) Time to get packed – they need the cash from the sale to pay for movers, etc. therefore, they would like some time after the settlement occurs to take their time with this process. A free rent back from the buyer for a month will likely be plenty of time for them to accomplish this.
(3) The ability to leave unwanted items – as mentioned earlier, they have let the home become cluttered over the years. There are lots of belongings that they do not want to take with them, and it would be much easier to leave them for the buyer to handle after they move out.
Example 2: Three Sisters Who Inherited A Property
Here is another fictional example; 3 sisters who have inherited a property in Woodbridge, VA from a parent who passed away recently:
The property they’ve inherited needs substantial updates and repairs to bring to market standards; however, they do not wish to do this. They all lead busy lives and have their own families, so they decide that selling the house as is in its current condition is the best route for them to take.
One of the sisters has been living in the property to care for the parent for the past few years, so she will need some time to find a new place to live and move out.
Getting the cash proceeds from the sale of the property will be nice, but none of the sisters are in a situation where they desperately need it as soon as possible.
After talking it through with each other, they decide the most important thing to them in this transaction would be:
(1) An extended settlement – since one of the sisters lives in the property, they will not be able to vacate immediately. It will take some time, and they think that three months will be sufficient. They would like to get it under contract as soon as possible, so they don’t have to worry about it anymore.
(2) The ability to leave unwanted items – just like the example before this one, it will make it much easier for them to leave the junk they don’t want to keep for the buyer to handle.
These examples are by no means an exhaustive list, but they are relatively common things seen regularly. Almost nothing is out of bounds to ask for either, even if it sounds crazy.
Experienced real estate investors are constantly solving problems and finding solutions, so having a “wish list” is not something that is out of the ordinary.
Example 3: Karen Who Just Wants To Avoid Realtor Commissions
A fictional example of someone who is asking for unreasonable things in the transaction is Karen:
Karen has no reason to sell her home to an investor other than the fact that she does not want to pay realtor commissions. Her house is in good shape, not perfect, but not bad at all either.
Selling a house fast without realtors seems appealing to her, but she doesn’t realize that she is “wanting her cake and to eat it too.”
She saw a house down the street sell on the market for $300,000, and this is the price she wants for her home without having to update or fix anything up.
She figures that an investor will be able to buy her house as is for this price, but unfortunately, they will not.
If she wants $300,000 for the sale price, her best option is to have the property updated and then list it with a realtor.
Or she can look at alternatives such as Curbio where they will fix up your property and then get paid at settlement.
Like I mentioned, good real estate investors are used to dealing with these scenarios (except for Karen’s) and should be very accommodating. The tricky part is finding one, which leads us to step 2!
Step 2: Find 2-3 Experienced, Local Investors
Of the three steps here, this is undoubtedly the most challenging. We have plenty of articles written about how shady this industry is and why it is that way. There are lots of wolves in sheep’s clothes in this space, and it can be hard to tell the good from the bad.
How To Avoid The Bad Guys
I cannot stress enough how important it is to avoid wholesalers. I linked to it earlier in this article, but if you do not know what a wholesaler is, check out this article.
If you end up selling with a wholesaler involved, at best, you will sell your home for a much lower price than if you sold directly to a genuine buyer. And at worse, they will waste your time, and you will be unsuccessful in selling your house fast, and likely won’t even sell it at all.
Real estate wholesalers are expert marketers and prey on people that are selling a house fast. By using deceptive sales tactics and misleading people intentionally, they are able to lure people in and convince them to “sell” to them.
Having a wholesaler involved is like having a realtor who offers to sell your home for $150,000, but anything above that, they get to keep 100%. So if it sells for $200,000, they end up getting a $50,000 commission.
Would you ever agree to list your house with a realtor who charged a 25% commission?
This sounds crazy, but these bad actors dominate this industry. They all advertise that you can do a “quick cash home sale,” and they make selling a house fast appear to be very simple with them. But it is anything but that.
Some states are cracking down on real estate wholesaling as I mentioned above, but for the most part, people can get away with it, and it is a rampant part of this industry. I did a Google search for “selling a house fast Manassas,” and here are some of the results I found:
This is the first example I found—an elementary landing page created by Investor Carrot. Investor Carrot is a simple way for real estate investors and wholesalers (mainly wholesalers) to publish a website.
We use Investor Carrot ourselves, but have completely changed the site to fit us. A lot of people will just leave it as is and not customize anything, and it is pretty obvious when this happens.
Wholesalers LOVE Investor Carrot because of how simple it is and how it is designed to convert people into sales.
Here is another example:
This is also an Investor Carrot website. There is nothing at all wrong with Investor Carrot (we use them!), but it seems that these types of websites, and 90% of the online ads and search results are done by wholesalers. And because they falsely claim to be cash home buyers, it is nearly impossible to tell if they are or aren’t.
If this is a wholesaler, which is likely the case, then this is an overt lie because wholesalers blast out property info to their buyer list in order to sell the contract to an end buyer at a higher price.
All of the websites and ads you’ll see look precisely the same, and they advertise that you can “sell your house fast as is” and that they are a “cash home buyer.”
How To Find The Good Guys
It is tough, if not impossible, to tell the difference between a wholesaler and a real investor. Many great investors do not have much of a presence online, so it is difficult to find them here.
The best way to find a few local investors to look at your home is to speak with a trusted resource and ask for any recommendations they have.
You may not know any real estate investors personally, but there is likely someone you know who can point you in the right direction and make an introduction. Maybe a neighbor, a friend, or a relative knows a trusted real estate investor that they can put you in touch with.
We consistently get these types of referrals from people we know who put us in touch with people looking to sell their house fast, for cash. One example was a couple who wanted to sell their house fast without repairing it, so they reached out to a buddy of theirs.
This person had worked with us on landscaping needs in the past and was able to introduce us. We ended up purchasing their home, and it worked out great for everyone.
Another example was when my friend’s father-in-law inherited a property in Manassas when his mother passed away. Selling a house fast was much more appealing to him as opposed to fixing it up and selling the traditional way, so he asked my friend about this, and he was able to get us connected and we bought his house.
An introduction from a trusted resource is as good as gold because they put their reputation on the line by introducing you two. If you speak with a friend about dentists and refer someone who does a terrible job and is rude, this reflects poorly on the friend because you trusted them to refer you someone good.
This is why getting an introduction to a solid, local investor from someone you trust is likely the best way to find someone who will buy your house as is.
The next best way to find an investor if this doesn’t work is to sift through some of the companies you’ve found online.
Look at their Google and BBB (check out our reviews!) reviews to see some horror stories and why. We’ve written a case study for someone named Pete (we changed his name for privacy reasons), and he was able to successfully sift through several websites to find a good, local investor (Home Sale Solutions).
We once interviewed this seller about his experience, and here is a transcript of what he had to say about another house buyer he talked to before finding us:
“When you read their BBB write-ups (reviews), they were somewhat complementary, but then there were a lot of horror stories too. And the main one that I saw that triggered me to go with you all was they (people writing reviews) talked about the fact that a lot of groups will buy your property and then try to resell it.
So, their ability to do the closing relied on them being able to get it resold. They were basically acting as an agent for somebody else. You all had a pretty good discussion on your website about how you did the stuff yourself and how you weren’t going to ramp the thing off to some other buyer.”
Going through the BBB reviews tipped Pete off to see what many companies attempt to do. Our company didn’t even have any BBB reviews, but he decided that someone with no reviews was better than a company with a few horrible reviews.
If you end up having to do this, it is certainly more work than getting an introduction from someone you trust, but if you follow these steps, you’ll end up with a great outcome no matter what. Before we move on to step 3, let’s recap what should have happened up until this point.
By now, you should have determined the critical things to you in the transaction that you need (step 1), such as rent back, fast settlement, long settlement, etc. You should also have found 2-3 potential investors who are interested in purchasing your home (step 2). And this brings us to step 3.
Step 3: Decide On The Best Offer And Move Forward
For this step, we now need to get the offer(s) and decide to move forward with the best one. For the investors, they will set up a showing typically to determine the condition of the home. This is also an excellent chance to speak in person about the things that are important to you from step 1.
How An Investor Will Value Your Property
When investors are looking at your home, they are determining the renovation budget and how the house is laid out. We’ve written articles on how investors value properties. Still, to summarize, they will typically be looking to buy somewhere around 70-80% of what the home would be worth if the house were updated to market standards.
Some investors will give an offer on the spot, but others might digest it and send an offer in the next few days after seeing the property. Seeing the actual contract, they intend to use is critically important for you to do.
Look For Red Flags In The Contract
The contract will allow you to determine if they are truthful about their plan to purchase your home or wholesale it. When you get a contract from an investor, look through it and decide whether it is credible or not.
This is very easy to do; check out this article to see what offers from good investors look like.
Determine Who Is The Best Fit
Once you determine the legitimate offer(s), it is time to decide which one is the best and move forward. Price should obviously play a role, but making sure your needs are met from step 1 is equally important.
By talking to 2-3 solid investors, you should get a good sense of who the best fit is, which is why we recommend doing so.
Congratulations! At this point, all of the hard work is done. It’s downhill from here, assuming you picked a great buyer. Since you’re selling a house fast to an investor, there isn’t much to do in terms of home inspections, appraisals, etc.
The buyer should help walk you through the settlement process and everything that needs to happen from here.
By far, the most challenging part of selling a house fast directly to an investor is FINDING the investor. Hopefully, this article gave you some clarity and confidence on how to do precisely that.
Please reach out to us with any questions you might have, and check out Home Sale Solutions if you are thinking about selling a house fast for cash. Best of luck and God bless!