What Is a House Flipper? A Guide for Home Sellers

How does house flipping work?

House flipping is a strategy that hinges on the practice of buying properties at a lower cost, often due to the need for repairs or refurbishments, and reselling them at a higher price after renovations. Villeda emphasizes one of the core aspects of this approach, saying, “Someone that is not willing or unable to do repairs or clean up the home, most flippers will take the home ‘as is’ and actually prefer it.”

Though it might sound straightforward, house flipping involves detailed knowledge of property values, renovation cost management, and real estate market trends. The process also varies greatly based on factors like market conditions and the amount of renovation required.

Who are house flippers?

House flippers can be broadly categorized into two types: individual investors and house-flipping companies.

Individual investors: These are typically private individuals or small groups who buy, renovate, and sell homes as a form of personal investment. This investor may flip homes as a full-time job or as a side venture to generate extra income. They often work closely with the transaction process and may even conduct some renovations themselves.

House-flipping companies: These are organized businesses that operate on a larger scale. House-flipping companies have teams to manage different aspects of the process, from property acquisition to renovation to sales. They often have more resources and can handle multiple projects simultaneously, providing a streamlined and professional service.

Both types have their advantages and can offer unique selling experiences, and it’s crucial for homeowners to understand the differences when considering selling their homes to a flipper.

How much will a house flipper pay?

The amount a house flipper is willing to pay for a property often follows a guideline known as the “70% rule.” This rule suggests that a flipper should pay no more than 70% of the after-repair value (ARV) of a property, minus the cost of necessary repairs and renovations.

“Profit margins are what is important to [house flippers],” says Leanne Hester, a top-performing Pennsylvania real estate agent. “So the less odd features with more square footage is always best. Any negative things about the lot will take a big hit on the value. So the less debris for the flipper to remove is a plus. Get rid of old cars, boats, RVs, etc.

It’s important for homeowners to remember that while selling to a house flipper can offer a quick sale and relief from repair burdens, the offer price will likely be lower than the potential market value of a fully renovated home. Each selling situation is unique and deserves careful consideration.

Will I lose money selling to a house flipper?

Whether or not you’ll “lose” money when selling to a house flipper really depends on your perspective and circumstances. House flippers need to purchase homes at a price that allows them to cover renovation costs and still make a profit. As Villeda explains, “House flippers make their money on the buy, so they have to buy for the right price, but again, it needs to be a fair price.”

That said, selling to a house flipper can expedite the sales process and alleviate the burden of repairs and upgrades, which may represent significant cost and stress savings for you.

Should I sell to a house flipper?

The decision to sell to a house flipper depends on your individual circumstances. If you’re looking for a fast, low-hassle sale, or if your home requires extensive repairs that you’re unable or unwilling to address, selling to a house flipper can be a viable option. It can relieve you of the burden of renovations and long waiting times associated with traditional sales.

However, you’ll need to weigh the potential cost savings, speed, and convenience against the likely lower selling price, and consider seeking advice from real estate professionals to make an informed decision. It’s important to know what your home is worth.

Villeda advises sellers, “Make sure they know their [home’s] value, even though the house may need a lot of work, some investors do not offer the current market value.” Ultimately, the decision should be based on your individual needs, circumstances, and knowledge of your home’s potential value. You can get a ballpark preliminary value estimate on your home using HomeLight’s Home Value Estimator.

What are the pros and cons of selling to a house flipper?

Selling to a house flipper offers its own set of advantages and disadvantages. Here are the key pros and cons to consider:

Pros:

• Speed and ease: As Hester notes, “The good news is, it will most likely be quick, (usually cash), without a lot of inspections.” Selling to a house flipper can expedite the sales process, often without the need for lengthy inspections.
• No repairs needed: Hester adds that selling to a flipper usually means closing the sale “without having to make any repairs or even clean out the house of debris.” This can save you the time and expense associated with preparing a home for sale.
• Flexible closing date: Most flippers offer flexibility on the closing date, allowing you to sell on your own timeline. As Hester puts it, “Most flippers will allow you to pick your own closing date!”

Cons:

• Potential for lower sale price: House flippers aim to make a profit, often buying at a lower price. Hester notes, “Flippers are out to make money… So if you decide you want to market to flippers, you will have to count on it being a significant price reduction.”
• Limited negotiations: The flipper’s purchase offer often takes into account the cost of repairs and their profit margin, which may limit room for negotiation.
• Risk of scams: Like any business, house flipping has its share of less reputable players. It’s essential to do your homework to ensure you’re dealing with a reputable flipper.

Remember, every selling situation is unique, and the best choice depends on your individual circumstances. Always consult with real estate professionals to help guide your decision. A top agent can help you weigh the pros and cons.

“If the moving process is just too much to take on, and repairs and updates are excessive, then let the flipper do it,” Hester says. “Whatever you don’t want to move can stay. Repairs are on the flipper. No need to update or repair anything. And the seller will have flexibility on when they want to close, not needing to feel rushed.”

Comparing the house flipper route vs. traditional sale

When deciding whether to sell to a house flipper or opt for a traditional sale, there are several factors to consider. Here, we’ll compare the two routes using three main factors: timeframe, potential profit, and stress/effort.

Timeframe comparison

Selling to a house flipper is often a faster process, as they typically offer cash and can close in as little as a week. A traditional sale, on the other hand, often takes longer due to factors such as home inspections, potential buyer financing issues, and other common hurdles. According to the National Association of Realtors, in a traditional home sale, a seller can expect to spend months preparing their homes, followed by 15-25 days or more listing their house on the market, followed by another 43 days to complete the closing period if it’s a lender-financed purchase.

Financial comparison

When selling to a house flipper, the price you’ll get is often lower due to the flipper’s need to make a profit after making necessary repairs and upgrades. In contrast, a traditional sale could fetch a higher price, especially if the market conditions are favorable and your home is in good condition. Of course, you’ll need to factor in costs such as agent commissions, closing costs, and any necessary repairs you’ll need to make before selling. However, HomeLight’s data shows that a top agent can sell a home faster and for as much as 10% more than an average agent.

Stress and effort comparison

Whenever you sell a home, the process can exact an emotional and physical toll on the seller. Selling to a house flipper often requires less effort and emotional investment. You don’t need to worry about repairs, home staging, or multiple showings. Selling a home for cash is not only fast, but often very simple compared to a traditional agent-assisted sale.

Insights from Jamie McMartin, a HomeLight Elite agent with 17 years of experience, further underscore these comparisons:

• Seek professional guidance: “Engage the services of a reputable real estate agent who has experience working with house flippers. They can provide expert advice, help you evaluate offers, and guide you through the negotiation process.”
• Research and verify: “Before entering into any agreement, conduct thorough research on the reputation and track record of the house flipper. Verify their credentials and past projects, and ensure they have the financial capability to complete the transaction.”
• Evaluate offers: “Analyze the offers from house flippers carefully, taking into account the purchase price, proposed timeline for completion, and any contingencies. Compare these offers with other selling options available to you to determine the best course of action.”

Choosing the right route depends on your personal circumstances, financial situation, and comfort level with the selling process. If you decide to sell to a house flipper, an experienced agent can help you get the most out of your sale.

“We have witnessed successful sales to house flippers where sellers benefited from a simplified selling process and achieved a quick sale at a fair price,” McMartin says.  “However, we have also come across situations where sellers did not fully research the house flipper’s background, leading to delays or complications during the transaction. This highlights the importance of due diligence and seeking professional advice.”

Hester agrees and cautions: “There are some companies out there sending letters saying, ‘I’m an investor and want to buy your home.’ Some will offer you big money and then reduce that amount once they do their inspections. Don’t be fooled. Get an agent that knows how to market to investors.”

HomeLight can connect you with a reputable real estate professional in your market who can provide valuable guidance to help you make the best decision. Simply answer a few simple questions to get started.

How do I find a reputable house flipper?

If you’ve decided that selling to a house flipper may be the right move for you, it’s crucial to ensure you’re working with a reputable one. Here’s how to find and vet potential house flippers:

Tips on how to research and vet potential house flippers

• Ask for references: Reputable house flippers should be able to provide references from past sellers. Reach out to these references to gain firsthand insights into their experiences.
• Check their track record: Look for house flippers with a proven track record of successfully buying and flipping homes. This can be a good indication of their reliability and financial capacity.
• Get everything in writing: Make sure all agreements are in writing, including the purchase price, closing date, and any other important details. This will help protect your interests.

Red flags to look out for when working with a house flipper

• Pressure to sell quickly: While selling to a flipper is typically a faster process, be wary of any party pressuring you to make decisions in haste.
• Lack of transparency: Flippers should be upfront about their intentions and plans for your property. A lack of transparency could signal potential problems down the road.

Useful resources for finding and checking out house flippers

Resources such as your local real estate investment association or online real estate forums can be helpful in finding and vetting house flippers. Additionally, the Better Business Bureau and your state’s real estate commission can provide valuable information about a flipper’s reputation and licensing status.

If this process sounds daunting, remember there are services designed to help you navigate these waters. For instance, HomeLight’s Simple Sale Platform connects home sellers to one of the largest networks of cash buyers in the U.S. This can simplify the process, ensuring you connect with reputable house flippers quickly and easily. Fill out the Simple Sale online questionnaire, receive a no-obligation cash offer in as little as a week, and close in as few as 10 days.

Remember, due diligence is key when selling to a house flipper. Take the time to research, ask questions, and consult with professionals to ensure a smooth and successful transaction.

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