Many people think a real estate agent is the only option when it comes to selling their house. They think, “I need to sell my house, so I should go get a real estate agent to list it for me.” They never consider the fact that an investor could meet them at their house, present an offer, and get them their cash in 10 days. Maybe they have considered this option but they figure that the investor won’t pay them what their house is “worth”. Let’s examine the true selling price of a home when you sell with a real estate agent.
List price of your house: $300,000
Price you are most likely going to be offered: $291,000 (houses generally sell for 3% below their list price)
Agent commissions: $17,460 (the buyer’s agent generally gets 3% and the seller’s agent generally gets 3%, so a total of 6%)
Repairs: $5,000 (no matter how good of condition your house is in there is going to be some termite damage and/or touch up painting, among many other things)
Closing costs: $9,000 (closing costs are generally more than 3%, here in Los Angeles the move taxes are extremely high and if you’re selling a lower priced home you often have to pay for some/all of the buyer’s closing costs so this number could be much higher)
Total Cost To Sell With An Agent: $40,460
Balance left after the sale: $259,540
This might not shock you. Most people know that there are a lot of costs associated with selling their house. What they might not think of are the costs associated with their house not selling. A house in good condition can take 6 months to sell and a house in poor condition could never sell! Let’s say your house is in good condition and the market in Los Angeles is average (we just had one of the worst real estate collapses ever in Los Angeles) and you have a good real estate agent that gets your house sold in 4 months. During these 4 months you are nevertheless paying the mortgage, taxes, insurance, maintenance and all the other costs associated with owning real estate. Maybe you already found another home or apartment and now you’re paying double housing costs! Let’s examine what happens to your net selling price when we factor in the costs you’ll be spending during those 4 months.
Mortgage Payments $1,288 ( $240,000 at 5% over 30 years) x 4 months = $5,152
Taxes and Insurance: $450 x 4 months = $1800
Maintenance/Utilities: $250 x 4 months = $1,000
Total Cost To Sell With An Agent Now: $48,412
Balance left after the sale: $251,588
As you can see you’re down almost $50,000 from your initial list price which is about 16.33%. This assumes that your house is in average condition. Homeowners often think their house is in average condition only to have a home inspector show up and find that the roof is leaking into the attic, the electrical hasn’t been updated in 70 years or the foundation needs repairs. These problems can cost tens of thousands of dollars to correct and you can bet that the buyer will want these things fixed before they move in.
If you need to sell your house fast you don’t have the luxury of waiting 4 months for your house to sell. Investors are able to help sellers in many situations because they pay all cash, they buy “as is”, they pay most normal closing costs and they can close in 10 days. They also buy houses in any condition or situation.
Next time you’re looking to sell your house and you need a quick, hassle free sale consider selling to an investor.