The Investor Buying Process: How It Works When Someone Buys Your Home for Cash
August 1, 2019Traditional vs. Non-Traditional
Let’s pretend that you have decided to sell your home. You are trying to decide between selling the home yourself or selling through a realtor. One day, you receive a letter in the mail from someone who is interested in buying your home for cash. Your curious is piqued. You want to learn more about how the process of selling to a cash buyer.
Traditional home buyers will be wanting to build an entire life inside your home. They will picture football games, their child’s first steps, late night movies and so much more. When they enter your home, they might have a list in their head of what they want. They could be envisioning an open floor plan or a kitchen island. They will naturally be more selective in the home that they choose to buy.
First Fidelity Property Buyers approaches home buying in a very different way. We do not look at homes as a future place to build a life. We see homes as potential profit. Our team gets excited about things that most buyers would run from. We aren’t afraid of mold or flood damage. We don’t care if you have 30 cats and 1 liter box. We don’t mind holes in the ceiling or a crack in the foundation.
We buy homes based solely on if the numbers make sense.
At First Fidelity, we pride ourselves on our integrity. Most people looking to sell their home will benefit more by working with a realtor. But there are homeowners with extenuating circumstances who would benefit from selling to an investor. We wanted the people who decided to sell their homes to us to understand what we do and how the numbers work. We use the same process and formula for every property that we purchase
Let's Get Started
You’ve read a few articles about cash buyers.You like the idea of being able to sell your home fast and for cash. Maybe your home needs repairs and you don’t want to put the money into fixing it. Maybe you’re moving in a month and you don’t want to continue making payments on your home so you are trying to sell fast. Whatever your reasons, you are the type of person who would benefit from working with an cash buyer.
You pick up the phone and generously agree to let us look at your home and make an offer.
We walk around your house taking measurements and pictures of each of the rooms. Taking special care to take pictures of any damages or areas that need updating,
We thank you again, shake your hand, and let you know that we will have an offer ready for you in the next 24 hours.
Then we go back to the office to do some research.
Step One: Find the Comps
A “comp” or “comparable” is a property with similar features that has recently sold nearby to where the home is.
For our comps we usually look for homes that
- Have the same number of bedrooms and bathrooms
- Are within a ½ mile radius
- Have similar features (fireplace, pool, etc.)
- Have a similar area size
- Have recently been renovated
Now, depending on the home we might have to adjust some of the criteria. If you live in a more rural area we might widen the radius. If you are the only 2 bedroom 1 bathroom home in the neighborhood, we might use 3 bedroom 2 bathroom homes as comps. When we have a comp with criteria that isn’t identical to the home, we adjust the estimated sell price or ARV (After Repair Value) accordingly.
Even though we can adjust, we prefer to use homes as similar to the one we are trying to buy as possible.
Now that we have 3 homes that are a lot like the one we are buying, we can determine how much we could get for the h
Step Two: Determine the Cost of Repairs
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We use renovated comps for a reason. We want to know how much the home will sell for after it’s been gussied up.
Next, we need to know how much it would cost to get the current home in a similar condition to the other houses that sold.
Remember how we walked around the home and took a ton of pictures and measurements? Now, we are going to use those.
We have a tool called the “Repair Estimator” that we use to determine how much renovations will cost on your home. The Repair Estimator already has the cost of labor and materials needed to repair a home. From changing out the front door, to cleaning out a pool, to knocking out walls, the Repair Estimator has it all.
We look through the pictures of your home, and add each item that needs repairs. The Repair Estimator calculates the total cost of the repairs for us.
Step Three: Determine Holding Costs
Like any other company, there is a cost to doing business. During renovation, FIrst FIdelity will own the home and all of the monthly fees and costs that come with it. We’ll be paying interest rates on our own mortgage loan, insurance, or HOA fees. To ensure that we are making a profit on the home, we have to make sure to include these costs.
Our “Deal Analyzer” that calculates the price of these fees for the time it will take for repairs and to sell the home. We usually use the cost of the repairs to help us determine how long each home renovation will take. Then, we put in the necessary information and the Deal Analyzer spits out the holding costs for the home.
Step Four: Put it All Together
Now that we have our:
- ARV (After Repair Value)- the estimated amount a renovated home will sell for by using recently sold homes
- Repair Costs- the amount it will cost to have your home repaired and remodeled
- Holding Costs- the monthly charges we have to pay to own the home.
We are ready to figure out our offer price!
The formula that we use for our offer prices is:
OFFER PRICE= 70% (ARV – (Repair Costs + Holding Costs))
By using 70% of the amount, we leave ourselves with 30% profit. Like any other business, our objective is to make money. We use our profits to keep the business going to continue buying homes in the Houston, TX area.
Conclusion
At First Fidelity, we genuinely want to help people. Our team is was motivated by the possibility of helping Houstonians. We know and understands that sometimes life just happens. When we buy homes we help homeowners get out of situations like foreclosure or damaged homes.
Explore your options today by giving us a call at (832) 699-2333.