For better or worse, situations sometimes arise that necessitate a quick home sale. Maybe you just got offered your dream job on another coast and only have 30 days to pack up and move. Or maybe you’re struggling with loss of income, a serious health diagnosis, or a death in the family and you must sell a house quickly to cover expenses.
Whatever the case, if you’ve got a fast, easy sales process in mind, you might be considering selling your home to a flipper or iBuyer. Both of these options promise a quick cash offer and streamlined closing process, but there are differences between them that are important for sellers to understand before you sign away your home.
In this article, Joel Freis, a top-rated real estate agent at Keller Williams Miami Lakes, and San Antonio-based real estate investor Nick Disney, will help you better understand what house flippers are, how they work and where you can find a reputable one near you.
What is a house flipper?
A house flipper is a real estate investor that purchases properties, makes the needed repairs and renovations, and then lists the property for a profit. “We take calls from people who want to sell a house directly for cash,” says Disney. “We’ll then set up an appointment to visit the property and make a cash offer.”
What’s key to a flipper sale, is that the sellers typically have a home that needs substantial work that they either don’t have the money or the interest in repairing. According to Disney, there are no properties he won’t purchase — including those that have foundation issues or have been gutted by fire. “Once we take ownership of a property, our crews get to work so that we can get the property listed for sale or rent.”
The process looks something like this:
1: The investor researches and tours the property to calculate the estimated value of the house once it’s been fully repaired. This calculation is based on the location and size of the home, as well as the average sales prices of similar homes in the area.
2: The estimated total repair costs are subtracted from the total. “The most expensive repairs involve the roof, HVAC, foundation and major plumbing issues,” Disney says. “We’ll address structural issues first, and then will redo things like the bathrooms and kitchens.”
3: The investor will subtract their profit for the work involved in preparing and listing the home for sale. While every business is different, many house flippers will use the 70% rule for this calculation, which uses this simple formula to come up with their maximum buying price for a home:
[The home’s after-repair value (ARV)] X .70 – [The estimated repair costs]
Here is an example scenario showing how the 70% house flipper rule works:
-The flipper estimates the ARV at $250,000
-They multiply $250,000 x 0.70 = $175,000
-The flipper subtracts their anticipated repair/renovation costs – $35,000
-Subtract the $35,000 from $175,000 and you come up with $140,000
According to the 70% rule, $140,000 is the estimated maximum price a flipper might want to spend on this example home.
4: The investor makes an offer on your home. If you accept, they’ll get to work on the homebuying process. Depending on your timeline, the entire deal could be complete within as little as seven days.
What are the pros and cons of using a house flipper?
For a seller that needs a quick sale, working with a house flipper can be very appealing — particularly if the house requires significant repairs or renovations. Some of the benefits include:
- The ability to sell your home regardless of its condition
- You’ll typically get a relatively quick and straightforward sales process
- Little risk of the deal falling through
- No need for open houses, showings or staging
- Selling “as is” means you don’t worry about repair work
The flip side of using a flipper is almost always about the offer price and your loss of autonomy. Some of the drawbacks include:
- The offer you’ll receive likely won’t be as high compared to listing with a real estate agent
- You give up the ability to make any improvements as a way to increase the selling price
- If you hold an emotional attachment to the home, you won’t benefit from knowing who the ultimate buyer will be
Where can I find a house flipper?
If you’re interested in getting an offer from a house flipper in your area, Disney says the best strategy is to do an online search for “We buy houses in” the city your house is located. So, “we buy houses in Phoenix” or “we buy houses in Tampa,” as examples. “Almost all of the investors purchasing properties in your area should show up,” he says.
Alternatively, you can check for local real estate investment clubs on websites such as National REIA, REIClub or Meetup. These clubs hold regular meetings that you’re welcome to attend if you want to get to know house flippers in your area. You can also contact the group organizer directly to ask whether they know of anyone in the club who is actively looking for house flipping projects.
A word of warning: like all businesses, not all investors that position themselves as reputable house flippers in your area will have your best interests in mind. To avoid a scam, make sure to do your research before deciding to work with an investor. The business’ website and online reviews are a great place to start, but Disney also says homeowners should trust their gut. “People have pretty good instincts,” he says. “If you don’t feel comfortable with a person, call someone else.”
You can go ahead and request an offer from an iBuyer, but you don’t have to sign anything right away. Have your lawyer or your trusted real estate agent review it first.
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House flippers vs. iBuyers: What’s the difference?
Like a house flipper, an iBuyer (instant buyer) purchases houses for cash and promises a fast closing process. However, the types of homes they purchase, and how the process works, is different.
Use of technology
As the name suggests, iBuyers are high-tech buyers that use technology and algorithms to assess the value of a house and provide an instant offer to sellers. If the seller accepts the offer, the iBuyer will then move through the closing process — often in as little as a week. They’ll then take on the responsibility of marketing and reselling the home for a profit.
Unlike flippers that are typically looking for houses in need of significant repair that they can renovate prior to putting the house on the market, iBuyers are looking for houses that they can buy and sell quickly — not necessarily a fixer upper.
Not staging, no showings, no open houses
For sellers looking for a quick, cash sale, the idea of working with an iBuyer can be an attractive one. They won’t have to stage and have photographs taken of their home, nor will they need to plan around showings or open houses — a particularly unattractive prospect for some homeowners in the last few years.
“In the early days of the pandemic, I did get some clients who were scared and didn’t want to do a lot of showings or have a repair person coming into their home,” Freis said. “That’s an ideal situation for using an iBuyer.”
However, sellers do need to understand that the offer they receive from an iBuyer typically still won’t be as high as if they list the house with a real estate agent. It’s important for sellers to decide what is most important to them: a quick, hassle-free sale or getting the highest possible offer on their house.
For sellers who do decide to use an iBuyer, Freis offers one important piece of advice: to review their options and contract carefully. “You can go ahead and request an offer from an iBuyer, but you don’t have to sign anything right away,” he says. “Have your lawyer or your trusted real estate agent review it first.”
Some of the biggest and most reputable iBuyers right now are Opendoor, Offerpad, and Redfin Now.
HomeLight can also provide you with a cash offer to buy your home through its nationwide Simple Sale platform. With Simple Sale, you get a quick, all-cash offer for your home that comes with no hassles, no obligation, and flexible moving dates.
More answers to your house flipper questions
How much do house flippers offer?
As we mentioned above, a house flipper will often use the 70% rule when determining how much of an offer they’ll make on a property. Remember: flipping houses is a business, so the company you’re selling to needs to watch out for their profit margin when building an offer. That offer will depend not only on the fair market value of the house, but also the cost of repairs and renovations they’ll need to complete prior to listing the house.
Can you flip a rental property that currently has tenants?
In many cases, yes, so if you’re looking to keep tenants in the home, you’ll want to look for an investor that provides this service. According to Disney, this is a big difference between house flippers and iBuyers. While an iBuyer wouldn’t be interested in purchasing an occupied property, a flipper may decide to fix up the property and then either take over the property management or sell it to another investor who wants that responsibility.
Can I get a cash offer if I’m working with a real estate agent?
Cash offers have been on the rise the last few years, with a July 2021 survey showing that 23%of existing home sales were purchased with cash. While much of this trend was a result of buyers trying to get an edge in a very competitive housing market, a 2022 market survey by HomeLight suggests that cash will be here to stay because it is convenient and results in a faster and more certain closing process.
Freis suggests that even if a buyer is leaning toward using a house flipper or iBuyer for a quick, cash sale, that they still work with a real estate agent and list the house on the market before accepting an offer. “Right now houses are going under contract in 7-10 days,” he says. “It might [behoove] you to look at a few quick cash offers first.”
Our data shows that the top 5% of real estate agents across the United States sell homes for as much as 10% more than the average real estate agent. To connect with a top-rated real estate agent in your area who can help connect you to cash buyers, try HomeLight’s Agent Match tool. It makes the process simple and fast.
What if I get an offer from a wholesaler?
Freis warns sellers to watch out for predatory wholesalers when evaluating cash offers, as they can tie up the property and keep you from getting the best offer on your home.
Wholesaling involves someone who enters into a real estate purchase contract with a homeowner, and then subsequently tries to sell an “assignment” of that contract to a third party for a profit. “They will position themselves as a serious buyer, but will then ask for a much longer inspection period. They do this so they have time to make the contract assignable,” he says.
To avoid these types of buyers, make sure you’re getting at least a 10% deposit. “If there’s a buyer coming in with a small down payment and asking for a long inspection process, that’s a buyer you want to stay away from,” Freis says.
Scoring a quick cash offer on your house
In today’s real estate market, sellers looking for quick, all-cash offers have multiple options to explore. Whether you have a fixer-upper you think might be a good candidate for a house flipper, or a turn-key home that you’re just looking to unload quickly, the key is to not move too fast — and to evaluate all of your options carefully.
Research any prospective investors thoroughly and have an experienced real estate agent or attorney review any contracts you receive before signing on the dotted line. Doing so will help ensure you get the best possible cash offer for your property — with the fewest amount of headaches possible.
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