An investor will typically offer about 70% of a home's after repair value (ARV) — its estimated price after improvements — minus the cost of repairs. So if a property needs $30,000 in repairs, and an investor thinks they could sell it for $300,000 after, they might offer around $180,000 for it.
However, the specific amount an investor will pay for your property depends on several factors, including your home’s condition and location, the health of the local rental or real estate market, and the investor's exit strategy.
If you’re considering selling to an investor, but want to make sure you’re getting a fair price, you have a few different options:
- Start with with reputable cash buyers in your area. Our team has put in hundreds of hours of research to find the top cash buyers in all 50 states — ranging from well-known iBuyers to free services like Clever Offers, which can help you source competitive offers, without the hassle of calling up investors on your own.
- If you're considering the investor route to save time and money, but wouldn't mind having an agent do the work, consider working with a top-rated low commission realtor instead. An experienced realtor can help you target cash buyers and sell quickly without the risks of going it alone.
- If you're on the fence and want to test the waters before making a decision, start with Clever Offers. With Clever, you can explore instant cash offers worth up to 100% of your home value, or opt for a 7-day listing targeting a much larger pool cash buyers — allowing you to sell in as little as 7 days for the highest possible price.
Keep reading to learn more about what different types of investors might offer for your home.
Types of investors that buy houses
Cash home buyers generally fall into a few different categories, each with their own exit strategy — or way to cash in on an investment. While some investors wear multiple investing hats, others specialize in a specific niche.
Type | Exit strategy |
---|---|
House flipper | Purchases properties with room for improvement, add value through renovations, and resell them for a profit. |
Buy-and-hold investor | Purchases properties for the purpose of generating long-term revenue through monthly rental income and home price appreciation. |
Wholesaler | Gets an undervalued property under contract, then resell the contract to another property investor. |
iBuyer | Purchases homes in high-demand markets at slightly less than market value, make minimal cosmetic improvements, and resell them for a profit. These companies also charge service fees. |
House Flippers
If you've ever watched HGTV, you're probably familiar with the house flipping approach to real estate investing. House flippers, also known as fix-and-flip investors, purchase homes at a bargain, add value through home improvements, and resell the property for a profit.
Fix-and-flip investors generally prefer homes that need only cosmetic improvements, although they may buy homes in need of larger renovations if they can get them at a steeper discount.
Generally speaking, a house flipper will offer right around 70% of a home's after repair value (ARV), adjusting up and down for factors that make a property more or less attractive as an investment.
Buy and hold investors
Rather than flipping homes for a quick profit, buy-and-hold investors purchase properties for the purpose of renting them out for passive income until the time is right to sell.
In areas with competitive rental markets, buy-and-hold investors may make more competitive offers than house flippers — especially if there's an opportunity to cash in on steady home price appreciation later on.
Mathew Pezon, CEO of Pezon Properties, focuses exclusively on purchasing long-term rental properties. "We can usually offer more than other potential buyers because we don't need to make a short-term profit," he says. "Most of the time we can offer up to 85% of the market value less repairs."
Let's say a property's estimated worth is $350,000 after completing $50,000 worth of repairs. While a fix-and-flip investor might only pay $195,000 for it, a buy-and-hold investor offering 85% of market value would pay about $247,500 ($350,000 x 0.85 – $50,000 = $247,500).
The amount a buy-and-hold investor will pay also depends on the health of the local rental market, the potential monthly cash flow after expenses, and the time and money it will take to turn the property into a viable rental.
Wholesalers
Wholesalers don't purchase properties outright. Instead, they look for distressed or undervalued properties that they can get under contract at a bargain. Then, they resell those contracts to other investors at a markup.
Because of the relatively small profit margin involved in selling contracts to other investors (who are also looking to make a profit), wholesalers tend to make the least competitive offers of all. 70% or even less of fair market value is normal. However, they may also buy properties that other investors pass on.
A word of caution: While some wholesalers are upfront about the fact that they're looking to sell the contract to another buyer, others aren't. Where this becomes an issue is if the wholesaler is unable to find another buyer before the scheduled closing date. In that case, they might not follow through with the home purchase — meaning you'll have to start over again with a different buyer.
Signs that you may be dealing with a wholesaler include:
- Delays in finalizing an offer or sending over a contract, indicating they're shopping for a buyer
- An exit clause that frees the investor from the contract if they're not able to find a buyer
- Language in the contract that talks about "assignability" or "assigning the contract"
- A low offer price compared to competitors (which can only know if you get multiple offers)
- Inability to provide proof of purchase funds, such as a bank statement or letter from a finance backer
- Low or no earnest money deposit (a way to minimize their losses if they're not able to follow through
To take some of the risk and uncertainty out of selling to an investor, we recommend going through a free offer marketplace like Clever Offers, which vets investors before accepting them into their network. You can also check out our top picks for cash buyers near you.
iBuyers
iBuyers are large companies that make all-cash offers and can close quickly — sometimes in less than two weeks.
Like house flippers, iBuyers aim to buy houses that they can resell for a profit. However, instead of distressed homes with lots of room for improvement, iBuyers look for homes that are in relatively good condition — and in markets where home prices are likely to rise.
Established iBuyers like Opendoor and Offerpad usually pay much closer to market value than a typical house flipper. For example, our analysis of more than 200 homes bought and sold by Opendoor over the past two years revealed that the company typically paid about 5–7% less for homes than it eventually resold them for.
However, iBuyers also charge service fees, usually around 5%, and deduct a considerable amount for any repairs or touchups they note during their home inspection. Therefore, your final payout may be significantly lower than an iBuyer's preliminary offer price.
How much do investors pay for houses?
Many investors base their offer price on what's called the 70% rule: Pay no more than 70% of a home’s after repair value (ARV) — its estimated worth after fixing it up — minus estimated repair costs. The basic formula looks like this:
(ARV × 70%) - Estimated Repair Costs = Offer Price
So, if an investor believes your home is worth $350,000 after renovations, but will need around $50,000 of work, they might offer around $195,000.
$350,000 x 70% – $50,000 = $195,000
Alternatively, investors who purchase long-term rental properties may invoke a percentage-based rule, such as monthly rent should be at least 1% of the purchase price. So if a property will rent for $2,000, they may offer no more than $200,000 for it.
In addition to purchase price, investors look closely at profit potential. Most investors need to net a certain dollar amount or percentage in order for a deal to make sense. For example, an investor might aim for:
- $10,000 per wholesale property
- $10–20% profit (after expenses) per house flip
- $500 monthly cash flow per rental, with an opportunity to break even after 3–5 years
When formulating an offer, factors like condition, location, and exit strategy also come into play.
"A flip property needing significant repairs will lower the offer percentage," says Efrain Lopez of House Love Treatment Buyers LLC. "while a rental in a highly desirable neighborhood with low vacancy rates may justify paying closer to the higher end of the range."
Depending on the specifics of the deal, investors we've surveyed could pay anywhere from 50–90% ARV for a property, minus repairs.
ARV | Repair costs | Offer (50% ARV) | Offer (70% ARV) | Offer (90% ARV) |
---|---|---|---|---|
$300,000 | $30,000 | $120,000 | $180,000 | $240,000 |
$400,000 | $40,000 | $160,000 | $240,000 | $320,000 |
$500,000 | $50,000 | $200,000 | $300,000 | $400,000 |
What factors influence an investor's offer price?
According to Brian Harbour, Real Estate Acquisitions and Solutions at Real Deal Home Solutions, factors that influence an investor's offer include:
Location: Investors will typically pay more for properties in areas with strong employment, population growth, and other desirability factors. Locations undergoing revitalization but with high vacancy rates or low appreciation may attract lower offers, while neighborhoods with high crime or little room for growth may not appeal to many investors.
Price range: Most investors want to purchase affordable properties priced at no more than 70% of their after repair value (ARV), minus repair costs — although they may consider higher end properties with high profit potential.
Work needed: Generally, properties that require less costly cosmetic repairs are going to get higher offers than properties needing more extensive renovations. Investors may pass altogether on properties that have major roof, foundation, or other structural issues.
Holding time: The longer it takes to sell or rent the property, the higher the associated holding costs (e.g., utilities, insurance, taxes). Investors will typically offer less for properties that may not turn a profit quickly.
Profit potential: Investors may adjust offers higher or lower according to their personal profit requirements, such as $10,000 per wholesale deal or a 10–20% return (after expenses) on fix-and-flip properties.
Market criteria: Areas with rising home prices, quick home sales, and strong demand from buyers or renters will likely draw higher offers.
Overall risk: Investors typically offer lower for properties that present a higher risk, such as those with tax issues, problem tenants, code violations, or a seller in need of a faster-than-average close — leaving less time for due diligence.
Exit strategy: A property intended as a flip may get a lower offer while a buy-and-hold property in an area with strong rental demand may fetch a higher price. Additionally, some investors employ creative finance strategies, such as novations, that can net sellers as much as 80–90% of fair market value.
Should I sell my house to an investor?
"Working with investors suits sellers needing quick, hassle-free sales, like those inheriting properties," says Charles H. Chandler III, CEO of My Tennessee Home Solution.
"For a property in original or neglected condition, with the savings on realtor commissions and closing costs, sellers are oftentimes getting close to retail value," adds Brendan Grey, Founder of Grayscale Wholesale, who notes that sellers with homes in good condition or time to sell may be better off with a traditional listing.
"If there's no urgency, sellers might benefit more from a realtor who can market the property to a wide pool of potential buyers and potentially get a higher price than an investor would offer," says Chandler.
Upside of selling to an investor
- Fast closing: Cash investors can usually close much faster than the average homebuyer — often in as little as 1–2 weeks, compared to the 30+ days it typically takes a buyer to get approved for a conventional loan.
- Flexible timeline: Cash buyers often let sellers choose their own closing date, which makes it easier to coordinate your sale with moving into a new property.
- No repairs: Investors are less likely to care if your home isn’t in pristine condition. Their overall goal is to make a profit by adding value to the home, so they’ll happily make repairs and then flip your house for its full worth.
- Closing costs are covered: Most cash buyers, except for iBuyers, will cover closing costs like transfer taxes and title fees themselves, which otherwise typically amount to 1–3% of the sale price.
- No realtor commission: So long as you don’t have a realtor, you won’t have to pay any real estate agent commission, which otherwise adds 5–6% on average (split between the buyer’s and seller’s agents). If you do have a listing agent, you’ll have to pay their commission, which is usually around 2–3%.
- No showings: You can skip many of the hassle that come with selling the traditional way, such as prepping and vacating the property for showings.
- Easy out: Cash buyers are often willing to buy properties that typical house buyers won’t, such as those facing foreclosure or in need of extensive repairs.
Downside of selling to an investor
- Less money: An investor is unlikely to offer as much as your house is worth on the open market. In some cases, you could make less than 70% of your home’s potential market value.
- Little room for negotiation: An investor will only bite if there’s a good profit margin for them. This makes it harder for you to haggle over price. However, if you get multiple offers then some buyers may be willing to put more money on the table.
- No representation. Selling to an investor allows you to avoid hiring a realtor. The downside is that you don't have anyone looking out for your interests during the sale. If you do hire a realtor, you'll need to pay them a commission — so we recommend looking into well-rated low-commission real estate brokers with experience in distressed home sales. At the very least, have an attorney or CPA read over your contract to ensure you're getting favorable terms.
- Not all cash buyers are reputable: While most investors aren’t trying to rip you off, there are a handful of dishonest or inexperienced ones. Disreputable cash buyers may not have the cash on hand to close without finding another buyer to sell the contract to. Others may try to lower their offers substantially after an inspection.
- Questionable sales tactics: Similarly, some cash buyers turn up the pressure to get you to sign a contract. While some sales pressure is to be expected in any type of deal, you should avoid investors who try to rush you into signing a contract before you've had it professionally reviewed.
How selling to an investor works
1. Find investors who meet your criteria
Start by researching real estate investors and iBuyers in your area. Look for the following indicators that a company is reputable:
- Recent, positive online customers reviews
- An up-to-date website that explains the home selling process
- A strong BBB rating, with minimal complaints
- Ability to find company members on LinkedIn or other professional forums
To ensure you get a fair price for your home, we recommend contacting at least 3–5 companies for offers. If you aren’t sure where to begin, comparing cash offers through Clever Offers is a good place to start.
2. Reach out to request an offer
You can generally reach investors directly by phone or through an online form on their website. Be prepared to provide information about your property's size, location, condition, and features, as well as your timeline and motivation to sell.
As a home seller, you may also want to ask about:
- The types of homes the investor typically buys and how many transactions they've done
- Whether they purchase properties outright or reassign them to other buyers
- The investor's process for coming up with an offer
- The typical closing timeline and factors that might slow down the process
- Any costs you might incur as a seller
- What happens if either party decides to cancel the contract
An iBuyer may present a preliminary offer based on the property details you provide, while a more traditional investor may delay making an offer until they see the property in person.
3. Schedule a walkthrough
Before making a final offer, an investor will send a representative (or come on their own) to inspect your property — usually within a week of your initial offer request.
If you work with an iBuyer, the home inspection may be conducted by video — although the company may still send a rep to view your property's exterior.
During the home inspection, the company rep will note any repairs or improvements needed and factor the costs into your final offer. The more work your home needs, the less your final offer will be.
The investor may present an offer on the spot or within a few days of the inspection.
4. Review and accept the offer
When evaluating offers, be sure to look closely at:
- The buyer's financial strength, including whether they're paying in cash or relying on 3rd-party financing
- Whether the buyer will be purchasing the home 'as is' or adjusting their offer based on additional inspections
- The closing timeline, and whether it affords you the flexibility you need
- The earnest money amount and how it will be deposited
- Who pays closing costs
- The net proceeds you can expect from the sale
- Any contingencies or exit clauses that would free the investor from the contract
- What happens to the earnest money if the investor is unable to close
- Additional accommodations, such as the ability to leave unwanted things behind or remain in your house for a certain amount of time after closing
Before accepting an offer, ask for proof of funds such as bank statements or a letter from a financial backer to confirm that the buyer has the cash to close.
We also recommend hiring a real estate attorney or CPA to review the contract to ensure the terms are fair and you’re protected if the buyer chooses to back out of the deal.
5. Complete title work and close on the property
Once the contract paperwork is signed, the investor will generally connect you with their preferred title company or attorney to manage the closing. The title company will:
- Run a title search to verify the property is free from liens or ownership disputes
- Issue title insurance to protect the buyer's interests
- Verify the seller's equity and remaining mortgage amount
- Manage earnest money and purchase funds in an escrow account
- Prepare closing documents, such as the deed and settlement statement
- Ensure all contractual obligations have been met before property changes hands
- Oversee the signing of closing paperwork
- Disburse funds to the appropriate parties at closing, including any creditors who may have liens on the property
- Ensure the smooth transfer of ownership
Because investors don't typically require mortgage approval, the closing process can happen as quickly as 7–14 days after signing a contract, compared to the 30+ days it takes with a traditional home sale process.
How to negotiate with an investor
Once you've reached out to see what various investors will offer for your house, you’ll want to be armed with negotiating tactics to help you get the best possible deal.
Here are some strategies you can employ as a home seller:
Know your home's fair market value
Your home’s fair market value is what it could sell for on the open market if it was listed with a realtor. Investors don’t offer fair market value, but you should have an idea of how close they are coming to it.
Knowing your fair market value also gives you greater negotiating leverage. Since you’ll know what your home could get on the open market, you can use this information to pressure investors into increasing their offers. You can find your home’s fair market value by consulting with a real estate agent.
Get competing offers
There’s no obligation or cost for getting an offer from a cash buyer, so you should get multiple offers to increase your chances of finding the best deal. By getting multiple offers, you increase the competition on your property and the amount it could sell for.
"Don't just call one investor; call multiple investors and let them compete for your home, advises Susie Brant of Exp Realty. "All will start out with a low offer, but when they know there's competition they will try harder to earn your business."
Look beyond the offer price
While the offer price is important, you should consider other factors like who pays closing costs, how quickly they can close, and whether they’re willing to waive the inspection.
According to Brant, "A good investor will offer to pay everything so as to make the process as easy for you as possible." If the investor is trying to pass on closing costs to you, that may be a red flag.
Don't feel pressured to accept an offer
While investors are looking to make a living and may apply some sales pressure, you shouldn’t feel like you’re being forced into a deal.
Investor Mathew Pezon says, "Be wary of buyers who try to pressure you into accepting their offer quickly. Take time to consider all options." You should be especially cautious of any investor who tries to get you to sign a contract without giving you time to have a real estate attorney read it over first.
Don't sign before the inspection
Some investors will make a strong offer only to reduce it following an inspection. If the buyer requires an inspection, then you should only sign a contract after that inspection has been completed and you know what the final offer will be.
As Brant says, "Hold firm that you won't sign on the dotted line with anybody until they can give you their final offer and that you're willing to wait if they need time to inspect the property."
Ask for proof of funds
Reputable cash investors will be happy to provide proof of funds, which will show they have the cash on hand to buy your property. If they can’t provide proof of funds, they likely need to secure financing, which dramatically increases the risk of the deal falling through.
Real estate investor Mike Bennett says that an investor who can’t provide proof of funds is a "major red flag, and should be avoided at all costs. If a buyer or wholesaler cannot provide POF, stay far away from them. They are a novice and likely have little to no experience as an investor."
Get your contract reviewed by an attorney
You should always get your contract reviewed by a professional. If you have a realtor, then they can review the contract for you. Otherwise, we recommend bringing the contract to a real estate attorney or a CPA to look over.
As Matthew Coan, owner of Cash Savvy Home Buyers, says, "The number 1 thing any seller should do when working with a cash home buyer is have a professional read any contact that you are given to sign. It is well worth the investment."
Secure an earnest money deposit
Just like you would if you were selling to a traditional buyer, you should get an earnest money deposit from an investor. A cash deposit demonstrates that the buyer is serious about purchasing your home and has the means to do so. A refusal to provide a deposit is a major red flag.
As Bennett explains, "If the buyer is buying direct, typical cash sale standards are 1–3% earnest money deposit." However, he notes that a wholesaler will often provide a smaller deposit upfront and then have the end buyer send a larger, non-refundable deposit to the escrow company once they reassign the contract.
Alternative to consider: Low commission real estate brokers
While investors offer the convenience of fast cash sales and solutions for hard-to-sell homes, there are certain situations in which it may make more sense to find a realtor.
According to investor Efrain Lopez, these scenarios include:
- You have time on your hands and are not in a rush to sell
- Your property is in relatively good condition and does not need significant repairs or updates
- Your home is in a high-demand real estate market where properties are selling quickly, and there are many buyers actively looking for homes
- You want to maximize your sale price, even if it means waiting for the right buyer and going through the traditional listing process
"In these situations, the seller would benefit from listing with a realtor, as they can market the property to a wide pool of potential buyers and potentially get a higher price than an investor would offer," says Lopez. "Realtors have access to MLS, which exposes the property to more buyers, and they can often guide the seller through negotiations to secure a better deal."
One hesitation sellers may have with hiring a realtor is that their commissions take a big bite out of their sale proceeds. If your home needs work, and you're already concerned about the price you'll get, paying additional money to a realtor can be a huge turnoff.
However, you don't necessarily need to pay high fees to enjoy the benefits of working with an experienced realtor. A growing number of low commission real estate options provide full-service representation for far less than the typical rate.
Get the best of both worlds. Compare instant cash offers worth up to 100% of your home value. Or, sell your home on the open market in just 7 days. See what cash buyers will pay for your house with Clever Offers. |
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