The real estate industry has experienced highs and lows over the past years. There are independent buyers, as well as investors, who capitalize on the real estate market. While independent buyers are looking for a home to live peacefully, investors have a different agenda.
Some may trick sellers to accept an unfair deal just for them to earn more. After all, real estate investors are primarily there for profit. That is why some homeowners are left asking, can I refuse to sell my house to a real estate investor?
No law prevents homeowners from being picky about who they sell their properties. With that said, homeowners can choose to who they want to sell their houses. Selling it to an investor has its pros and cons. Ultimately, a wise homeowner should weigh the benefits and consequences of selling a house to a real estate investor.
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Homebuyer has a broad definition. It is a general term for people who purchase houses. But, it has a few sub-categories worth noting.
A traditional homebuyer refers to the person or group of people (often family) who purchase a house for residential purposes. The primary goal of a traditional home buyer is to buy a house to live in. Apart from the sale price of the property, a traditional buyer is attracted to the features of the house more than anything else.
Is the home close to a good school? Is transportation available? Can the kids have their own bedrooms? Is the lawn perfect for gardening? How many stairs are there for senior living?
The questions above – and many more – are often considered by a traditional buyer working with a mortgage lender and a real estate agent to broker a traditional sale. Some may also spend more to get the house they dream of.
According to Zillow Group’s Consumer Housing Trends Report of 2018, 42% of homebuyers belong to the millennial generation, while 61% are first-time homebuyers.
Home investors are professionally-minded people who invest in real estate. They can be individuals or companies that make money from houses. This type of homebuyer is further classified into several subtypes:
Wholesale real estate investing defines a strategy where the investor buys and sells the property as-is, with no modifications or repairs done to the house. Investors in this line of homebuying purchase the property below its market value yet sell them for a higher price to another buyer without any alterations.
House-flipping has been a fad for several years now. In this investment strategy, the buyer purchases the house from the seller and does renovations, repairs, and improvements to the property. After all the upgrades are done, the property is listed in the housing market for a higher price to make a profit and recoup all the expenses.
The buy-and-hold investment is a slow process for the investor, but not too slow for them to lose money. The investor will purchase a home and can rent it over the years or simply keep it without renting and wait until the market conditions have improved before selling the property.
A buy-and-hold investor uses a cap rate to calculate the yearly expenses of holding the property and the potential profit. This investment type also allows the investor to accumulate real estate properties and grow his portfolio.
An investor that does almost everything stated above practices a buy-flip-hold strategy. The homebuyer – an individual investor or a company – purchases the property, renovates and upgrades it, then rents it out or waits for a better market condition before selling.
Refusal to sell a house to an investor is not a crime. Yet, many people are still concerned about it. “Can I refuse to sell my house to an investor?” has become a common question in the real estate industry.
The homeowner, also known as the seller in real estate transactions, makes the final decision in the home sale. You have every reason to reject an investor offer as long as that reason is valid.
Many homeowners’ refusals to sell stem from low offers, changing their minds, multiple offers coming, or if the seller is unsure that the buyer has the means to pay or apply for a housing loan with a mortgage lender.
If the seller has not signed a contract, the seller may still say no to an investor eyeing their property. However, a seller must adhere to some guidelines when refusing to sell.
The Fair Housing Project protects people from housing discrimination. Thus, you might face legal actions if your reason for not selling is solely based on one’s sex, race, religion, disability, or familial status.
Putting your house up for sale does not filter people from checking your place. So, you will receive several offers from all types of homebuyers. Though you may not consider selling your house to an investor yet, several advantages go with it.
Investors offer convenient deals. Most often, they go for paying cash and with minimal to no effort on the part of the seller. It is also a convenient way to sell because you don’t need to clean or de-clutter the house.
It also does not involve all the tiring stuff that traditional home selling comes with such as taking photos, listing, and staging. These traditional home selling steps require you to spend money, especially when hiring professionals to make your house more appealing for potential buyers who come to visit the place.
Renovations and repairs can cost a seller thousands of dollars most of the time. Traditional homebuyers look for houses they can comfortably live in. Most often, they want a house that requires no major repairs or renovations.
And traditional home buyers tend to be pickier than investors. Investors, on the other hand, will take the house as-is, with no renovations or repairs on the seller’s part. This will not only save costs but also saves the seller a lot of time.
The best part most investors give is the cash payment scheme. A big portion of traditional homebuyers financed their real estate buys through loan financing. Hence, there is a lot to worry about from the escrow period and appraisal to loan approval. Meanwhile, investors provide cash offers, so waiting is not in the vocabulary. Most cash deals are completed within days or weeks!
Closing dates in traditional home selling are stricter. Buyers can demand the date they want you to move out of the house. But if an investor purchases the property, they are more accommodating about your schedule. Flexibility is one of their best advantages. You can talk to them about the most convenient time for you to move out of the house, and they won’t make a big deal of it!
How can I refuse to sell my house to an investor? Saying a polite refusal is always a good way to deliver a rejection! A wise seller does not hastily sell but also weighs the pros and cons of the deal. Here are some disadvantages of selling to an investor:
Since investors primarily buy the house as a means of business and getting profit, expect a lower offer than the property’s actual market value. The costs of repairs and renovations are also deducted from the price offered to you, which may result in a not-so-good deal.
Investors do not require licenses to operate, unlike real estate agents. So, you must be careful in transacting with them. Practice your due diligence and research the investor you are dealing with. Read reviews or check your locality’s business bureau for warnings against individuals and companies.
If you live in your house for too long, you have learned to love it. Investors may not share the same emotional and sentimental attachment you have. They are there for profit and how to maximize the house’s earning capability.
A traditional homebuyer, however, may still share the same emotions as you have in your house. They want to keep it as homey and comfortable as possible since they will be the ones living in it.
Non-US citizen investors may face difficulties when purchasing a property. Aside from tax issues they may face, transferring huge amounts of money overseas requires many processes.
Thus, it can take a long while to complete the transaction. At this rate, it may be faster to sell the house to a traditional homebuyer in your locality instead. Or, choose an investor close to home.
Selling a house to an investor or cash home buyer solely depends on your discretion as a seller. Just ensure that you know and weigh the given benefits and possible consequences of your actions.
No one can blame you if you have valid reasons not to sell to an investor. As long as the reason you have is not discriminatory, then you are legally entitled to refuse a deal.
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