If you’re a home owner in Philadelphia looking to sell your home, you may be approached by wholesalers or “cash investors.” These are people who buy homes at a discount and then resell them for a profit. While it may be tempting to take their offer and sell your home quickly, there are several reasons why you should avoid doing so. First and foremost, these individuals often don’t have the best interest of the seller in mind. They may lowball you on your asking price, or try to push you into signing a contract that’s unfavorable to you. Additionally, selling your home through a wholesaler or “cash investor” can take much longer than selling it through a traditional real estate agent. So if speed is important to you.
As a former attorney that worked in Philadelphia briefly in the District Attorney’s Office, I took pride that I was able to help citizens of Philadelphia daily. As a Real Estate agent in Philadelphia I have been at tons of closings where the seller used a wholesaler to sell their home to my buyers. At closing the sellers are always amazed at how much they lost and how much the wholesaler made. This bothered me as making clients happy in transactions is why I love this job.
Let’s start with reasons why you think you would be interested in selling to a wholesaler. We will tell you what they say and then give you the honest truth.
I don’t want to pay a Real Estate agent’s commission: I don’t blame you. Commission is usually 5-6% in Philadelphia and that can be a lot of money.
Here is what the wholesaler will say: If you use a Realtor you will pay them money to list your home. With us, you don’t pay us anything. So that is sometimes true (sometimes it isn’t make sure to hire a lawyer if your not using a Realtor). However what they don’t tell you is that the amount of money that they are offering you will be much less than having a Real Estate agent sell it and take their Commission.
Here is a practical example for you:
Let’s just say your home is truly worth $200,000. A Realtor may sell it for $200,000 and then take 5% commission and closing costs totaling maybe another 2.3% for a total of 7.3% of the homes selling price. In this case it would be approximately $14,600. You would walk away with $185,400.
Now take the same $200,000 and sell it to a wholesaler, e-buyer, or cash investor. Typically the investor will offer you up to 70% of the true market value of the home. They call this a “fair offer”, but it is far from fair. Sellers rare even get close to 70%, but for this example we are using the best possible offer. So in this example you would be selling your home and netting $140,000. Guess who keeps the rest of the money? The cash investor! Sure they need some money to fix the home up so they can resell it for more, but is that your problem? No! Your trying to make the most you can make on your home.
So to recap the financials here.
Selling with the Realtor would net you $185,400. Selling with the Investor would net you $140,000. Paying a Realtor doesn’t seem that bad anymore does it?
If I use a Real Estate Agent I have to pay closing costs: The cash investor will tell you that they will pay all your closing costs and Realtors won’t. That’s not always true. A Real Estate Agent can also include in the listing that all closing costs are paid by the buyer. We just usually don’t do that because studies have shown that you net more money by following the system as it was designed. But yes, we could eliminate your closing costs as well. In the case study above, your cash investor paid your closing costs yet you still made over $45,000 less!
If I use a Real Estate Agent, I have to allow people in my home: The cash investor will tell you that you must allow showings and that they are horrible. This is also just not true. Many of my sellers do not allow showings and when an offer is made on the property, they then allow the potential buyer to walk through the home. In other cases I have made one day for a few hours as a time when showings can be conducted. As Realtors, we work for you and will do what you want. The market is on fire right now in Philadelphia anyway, so typically you deal with a few days of annoyance and walk away with tens and hundreds of thousands more than you would have by selling to a cash investor.
If I sell my home with a Philadelphia Realtor, I have to make repairs to the property: The wholesaler will come into your home and find every possible defect and tell you that if you use a Realtor, these need to be fixed before selling the home. This is simply not the case. A good Realtor will come to your home and analyze what it would cost to fix the home, and how much more it would net you by fixing it. If the answer is zero, we won’t recommend you do it. Realtors also can sell a home as is! As COMPASS Realtors, the team at Revolve Philly Group can also introduce you to COMPASS Concierge which will front you money to repair or enhance your home so that your net profit is even more!
If I sell my home with a Realtor it will take much longer than selling to a cash investor: The cash investor will tell you that if you list your home with a Realtor it will take much longer. This is generally not the case. If you’re home is priced correctly in this market your home should sell within a week. Once it sells a title search must be ran so that you get clear title. This same title search must be done when a cash investor buys your home. Cash investors will tell you that they can buy the home in a few days. If they are telling you this, they are being dishonest. As Realtors, we use the exact same title companies in Philadelphia that any of these wholesalers use. So yes, it could it take a week to sell your home, but otherwise the time frame is identical!
Other Important Facts:
- As Realtors, we probably have more cash investors in our CMA than any single cash investor does. We can broadcast your property to cash investors in our database and to cash investors all over the world who use the MLS to find properties.
- Many times the people that you think are buying you’re home are not the true buyer. The wholesaler is simply creating a contract that says they can buy it or an assignee can buy it. So they are often simply entering into a contract with you and then flipping the contract for more money to a different buyer.
- As Philadelphia Real Estate agents, we have seem almost every imaginable situation and have the education to adjust to these. Our job is to help our clients make the best informed decision and because of this you will always walk away with more money and happiness when using us! Forget about our commissions, we will work with you to make sure you get the most from selling your home.
Don’t Let a Cash Investor Buy You’re Home. Contact Brett Rosenthal, Realtor to sell you’re home in Greater Philadelphia today. Reach out if you are looking to find out How Much Your Home is Worth in Greater Philadelphia.
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Brett Rosenthal is an award winning Greater Philadelphia Realtor with The Revolve Philly Group at COMPASS RE. Born and raised in Greater Philadelphia into a Real Estate family, Brett is an expert in all things Philadelphia especially the people! As a former lawyer, Brett uses the negotiating skills he learned while practicing law to help his buyers and sellers in all Real Estate transactions. Brett’s team consists of an amazing group of people and great Realtors! In his spare time, Brett enjoys spending time with friends and family in and around Philly, taking his 2 golden retrievers to beaches & dog parks and playing and coaching Ice Hockey. Go Flyers!