Inheriting a house can be a blessing and a burden. While you may have fond memories associated with the property, maintaining and paying taxes on a house you don’t live in can become costly over time.
Some people choose to rent out an inherited property to generate income, but managing renters also comes with headaches and risks. If the house needs significant repairs or upgrades, the expenses can quickly add up. For these reasons, many people consider selling an inherited house, especially if they already own their own home.
One potential buyer is a real estate investor
Investors may be willing to pay cash for an inherited property, making for a quicker and simpler sale. They may also purchase the home as-is, saving you from having to make any repairs prior to listing it. However, selling to an investor also means you will likely get less money than selling the inherited home through a traditional sale. Investors need to be able to purchase properties low enough to eventually sell for a profit after fixing them up.
Here are some key pros and cons to weigh when considering selling an inherited property to a real estate investor:
Pros of Selling to an Investor
Cash offer
Investors often make cash offers, which are quick and uncomplicated sales. You can get the money from the sale deposited directly into your bank account without waiting for bank approvals and closings.
As-is condition
Investors typically buy properties in poor or unlivable condition and assume responsibility for repairs and clean-outs. This saves you from having to put in any money or effort.
Avoid fees
You avoid all the fees that come with listing a home traditionally, like home staging, inspection costs, Realtor commissions, and closing costs.
No showings
You skip the hassle of prepping the home for showings and open houses, and avoiding having strangers traipse through your inherited property.
Quick timeline
An investor sale can close within a week or two, while a traditional sale often takes 30-90 days at a minimum. This provides faster access to the equity.
Lower offer
Investors will make lower offers than retail home buyers would, often 70-80% of market value. But their offers reflect the money it will take them to renovate and resell.
As-is condition remains
Any deferred maintenance or outdated elements of the home become the responsibility and cost of the investor. They buy the problems along with the good.
No control over resale
Once you sell to an investor, you cannot control what improvements they make or at what price they list the home when reselling it.
No emotional connections
Unlike selling to a traditional family, you cannot vet an investor buyer based on how much they appreciate the home or its history.
Investors may flip quickly
Some investors aim to do quick cosmetic flips with minimal upgrades. So the inherited home may be resold faster than expected.
Key Tips for Selling to an Investor
If you decide to sell an inherited property to a real estate investor, keep these tips in mind:
Talk to multiple investors
Get offers from several companies or individuals so you can compare offers and vet each one.
Check credentials
Verify the investor’s business license and registration with the Secretary of State. Ask for references from other sellers.
Get everything in writing
Sign a purchase agreement that outlines the offer price, closing date, property condition, appliances/fixtures included, and any contingencies.
Hire an attorney
Have a real estate attorney review any contracts before signing to ensure your interests are protected.
Remove valuables beforehand
Take out any possessions you want to keep prior to the sale closing so they are not left behind. Selling an inherited home to a real estate investor can help simplify the process considerably compared to a traditional sale. But it also comes with downsides like a lower offer price. Consider both the pros and cons carefully, given your specific inherited home situation, before making a decision. Discuss the options with trusted family members or a financial advisor as well to determine if selling to an investor makes the most sense for you.
Tax Implications
Another crucial aspect to consider when selling an inherited house is the tax implications. The inheritance tax and capital gains tax can significantly affect the amount you receive from the sale. When you sell to a real estate investor, you might have a lower tax burden since the sale price will be lower compared to a traditional sale. However, it is always advisable to consult a tax professional to understand the full implications of your situation.
Flexibility
Investors are often more flexible with their terms. For instance, they might allow you to choose the closing date, or even rent the property back to you if you need more time to move out. This can be a significant advantage if you have other pressing matters to deal with or need more time to vacate the property.
Negotiation Power
While investors tend to make lower offers, they are often more open to negotiation than traditional buyers. This is because they are usually more knowledgeable about the market and property values and have a better understanding of the repair costs involved. However, it is still essential to be well-informed and prepared to negotiate to get the best deal possible.
No Financing Contingencies
Traditional buyers often have financing contingencies, meaning the sale is contingent on the buyer securing a mortgage. This can cause delays or even result in the deal falling through. On the other hand, investors usually pay in cash, removing the risk associated with financing contingencies.
Cons of Selling to an Investor
No Multiple Listing Service (MLS)
When you sell through a real estate agent, your property is listed on the MLS, which increases its visibility to potential buyers. However, when you sell to an investor, your property won’t be listed on the MLS, which means less competition and, potentially, a lower offer.
Investors Seek Profit
It’s important to remember that investors are in the business to make a profit. This means they will always be looking to buy at the lowest possible price and may use any defects in the property as leverage during negotiations. Therefore, it’s crucial to be aware of the property’s actual value and be prepared to negotiate accordingly.
No Personal Connection
Selling to an investor can feel more transactional and less personal compared to selling to a traditional buyer. This can be a con for those who have a strong emotional attachment to the property and would like to see it go to a family who will cherish it as much as they did.
Selling an inherited house to a real estate investor has its pros and cons. It can be a quicker and more straightforward process, with the potential for flexibility in terms and a faster closing. However, it also comes with the downside of a lower offer price, less visibility for the property, and a more transactional experience. It is essential to weigh all these factors carefully and consult with trusted family members, financial advisors, and real estate professionals before making a decision. Ultimately, the right choice will depend on your specific situation and priorities.
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