Although realtors are the default option when it comes to selling your home, it isn't always necessary and you may sometimes be better off NOT using a realtor and going the traditional route.
In some situations, like if you're under a tight timeline such as foreclosure, then listing your house on the MLS might take too long to sell before the auction date.
In cases where you need to make repairs before you can list the property, you may not have the funds on hand to do it, which means you'll lose a lot of money when the buyer attempts to negotiate down (assuming you find one).
These situations can be especially tough if there is little to no equity in the property, and MLS buyers aren't usually able to do other forms of purchase for your home aside from a standard bank-financed buy.
The downside to having little to no equity in a traditional sale is that you may lose money and have to pay out of pocket to cover the closing costs and agent commissions if the buyer isn't willing to cover it or only covers part of it.
An alternative is to work with an investor like us who is willing to purchase the home in cash (if there is equity).
Typically, in exchange for moving quickly and covering ALL the costs associated with the transaction, we would need to get a reduction on the total purchase price.
We also account for any repairs that need to be made to the property before we can put it back on the market for at fair market value.
This follows a formula: 70% of After-Repair-Value minus any repairs that need to be made.
So, if the home, for example, is worth $100,000 fully fixed up, then we need to purchase it in cash at $70,000 minus any repairs. If the repairs would cost about $20,000 to get it to market value, then $70,000 - $20,000 = $50,000.
We would need to purchase your home at $50,000.
Now, if you attempted to sell it on the MLS, you would not be able to list at $100,000. You would likely start your listing somewhere around $90,000. And it would take a few months before you find a serious buyer that's interested, which means you pay the mortgage, HOA, and bills during those 3 months.
Once the buyer makes their offer, they'll get the appraisal and inspection done, and then they will negotiate down. Possibly down to $80,000 if you're lucky, or less if the buyer knows how much will need to go into the home.
Assuming you get an accepted offer at $80,000, you then have to pay about $5,0000 (6%) in realtor commissions, which brings you down to just under $75,000.
Closing costs will be another $3,000 (estimated), which brings you down to $72,000.
With mortgage payments during the 3-6 months, you might be down another $1,800 - $3,600, bringing you potentially down to $69,000.
So, it really comes down to timing. Are you willing to wait and go through t he motions of showings, buyer offers, negotiations, and financing red-tape, or do you have a deadline where you have to sell the house more quickly?
If your have no equity in your home, then there are a couple of options.
Investors can employ a few different methods to either purchase your home or help you prevent having to pay for the note each month.
The first is owner financing - where you are allowing us (the investor buyer) to finance the home from you.
This means that you may receive a down payment and then the rest of the home's value in payments.
This is especially beneficial because you can get more for your home than you would with a cash offer.
Another option is a lease option - this is where you rent the home to us or a tenant buyer for 1-2 years, and then they exercise the option to purchase the home for the remainder of the value.
Again, the benefit here is that you can get closer to market value for the home and rid yourself of the burden of mortgage payments.
The added benefit is that you'll make rental income for the 1-2 years before you get the full purchase price of the home. And if the tenant ends up not purchasing, then you can do it again and make more income from the property.
The last option, in dire circumstances, is letting us take over the mortgage payments. This is where if you're unable to make payments, we just assume the responsibility of paying the mortgage. You essentially walk away from the property and no longer have to find a way to pay for it.
Now, there's a non-investor and non-realtor route of selling the house, which is a FSBO, or For Sale By Owner.
This can be great if you're able to find a buyer on your own by putting a sign on the yard or advertising as for sale by owner on online directories.
The downside to this is that you don't have all the marketing methods available at your disposal, which means less exposure to potential buyers. You are not able to advertise on the MLS because you are not a licensed realtor.
The benefit is that you don't have to pay the agent commissions once you do find a buyer.
Now, while this option can get more money in your pocket, it can take longer, which means more holding costs, and that can be dangerous if you're in a precarious situation that has a tight timeline.
Should you find that you're getting too close to the timeline, you can always contact us or any other investor. Investors are capable of purchasing properties within days with private money rather than waiting weeks or months to get approval from an institution.
If you would like to explore options, we can buy your Memphis house in cash if you just get in touch with us.