How does "We purchase ugly homes" work? We clarify

The signs on the electricity pylons are everywhere, saying that they will buy your house, even if it's ugly.

These cash-for-your-house companies promise a quick sale or an opportunity to unload a less than desirable property.

"The houses are in need and need to be renovated or revitalized," says Kate Story, known as Real Estate Kate. She works with a company in Tampa, Florida that buys and sells so-called ugly houses. "It's usually also a desperate situation for the people who sell it."

Who buys ugly houses?

The people who advertise to buy houses for cash are usually real estate investors who plan to buy the house cheaply, repair it, and sell it at a profit.

"Those of us with tags like" We buy ugly houses "," Cash for houses "etc. marketing, in contrast to the traditional method of the seller, really want to get in direct contact with house owners and do business directly with them Vegas-based real estate investor and seasoned house flipper Luke Weber.

There are many companies that use similar slogans and tactics to buy houses. The biggest and best known is the outfit "We Buy Ugly Houses". You are part of a large Dallas-based franchise company called HomeVestors of America. Their website states that they have existed since 1996 and have bought more than 100,000 homes.

Usually the price these investors offer is significantly below the value of a house. Sales close quickly as there are no bank loans involved and investors pay in cash.

"Although we say that we pay in cash, it is not the case that we show up at your doorstep with a travel bag full of 100s. It is amazing how many owners actually expect this," says Weber. Adding payments is usually done in Form of transfer.

Who sells such a house?

If someone wants to sell a house, there are a few options. You can:

  • Sell ​​it yourself, also offered for sale by the owner
  • Rent a real estate agent, the traditional route
  • Sell ​​it to a cash buyer

Each method has advantages and disadvantages. When a home owner sells a home in the traditional way, there are usually improvements, demonstrations, inspections, and other things that can cause a delay. Cash sales are different.

"It's not a stressful situation. We make it easy for the sellers. It depends on the conditions of the seller, the time frame of the seller and everything like that," says Story, adding that the seller doesn't even have to remove his belongings. Garbage companies can come in and take everything away.

Sellers looking for cash buyers often fall into one of three categories: the seller wants cash, the property is in bad shape, or the seller wants to simplify and save. This is a home that was bought with a bar offering in Tampa, Florida. Chris Zuppa / The Penny Hoarder

Weber says that people looking for money buyers often fall into one of three categories.

  • The seller just wants cash: due to financial problems, impending foreclosure, or something else, a seller can't wait for a typical sale, which often includes upgrades, real estate agents, and financing. Sometimes a seller simply has no use for a house. It could be from an inheritance or part of a divorce.
  • The property is in poor condition: it cannot be sold with traditional financing as most banks do not lend money to anyone who wants to buy property that is not in a livable condition. The house would not pass an inspection either.
  • Simplify and save: Either the seller doesn't like real estate agents or he wants to sell directly to an individual and not pay commissions. There are also few decisions to make when selling a home to a cash buyer: the only decision is whether to accept an offer or not.

Conventional listings usually take around 90 to 180 days from the seller's decision to sell to completion. Cash transactions are much faster.

"If it's cash and we have the title ready, I will sell houses in a few days," Story says, adding that most of their closings take place within a week or two.

How does a cash home sale work?

In many ways, selling a house in cash is equivalent to a traditional house sale. It's about someone seeing the house, making an offer and closing the deal. They just happen faster.

The buyer usually looks at the house personally or virtually to determine what condition it is and what needs to be done. They will also evaluate the neighborhood and examine the market conditions.

"We go through and have a rough idea of ​​what it will cost to repair the house and make them a reasonable offer," Story says.

The amount of the offer depends on many things:

  • The condition of the house.
  • The cost of necessary repairs and renovations and the time they will take.
  • The value of the house after renovation.
  • Transportation costs including insurance, utilities, taxes and loan payments.
  • Real estate commissions, productions, etc., which are necessary for the sale of the house.

History says that most legitimate money buyers offer serious money to the homeowner to show that they are serious. The seller then decides whether to accept the price or not. The cash price is usually lower than that of a seller when using a real estate agent, but there are also significant savings for the seller.

Weber gives an example of how a cash buyer, if a similar house nearby sells for $ 200,000, should be closer to a net equivalent of about $ 184,000.

"(The sale is) without commissions, and then there is an advantage of money now over money later," he said. "We also typically buy a property as it is, which means we won't ask the seller to do a number of expensive repairs."

He argues that a lower cash offer can achieve almost the same result as a higher offer that is sold in a different way. "You save money on holding costs, commissions, repairs, utilities, insurance, property taxes, property fees and closing costs, etc. A good cash buyer can break this down for the sellers."

Advice for homeowners

Buying ugly houses is big business and meets the needs of many homeowners.

"It is definitely a great way for a seller to sell a house, or at least explore their options," Weber says. "To be honest, there are many people who market this way and offer very low prices, but there are many cash buyers who offer very fair prices."

How do you avoid these dodgy buyers?

Story suggests that homeowners should know every cash buyer who wants an inspection period or says they don't have to look at your home before making an offer. "They'll probably come back and throw you down after they actually look at it," she warns. "In my opinion it is not as legitimate as someone who walks through the house and tells you:" I can offer you so much, I do not need an inspection period. "

Weber has some additional advice.

  • Show me the money: If someone offers a low deposit, does he really have the money to buy the house?
  • Ask for professionals: Real buyers use title firms and / or graduate attorneys, not bank checks or cash.
  • Relationships matter: it's not always about the price, sometimes it's really about selling to the person you like the most.
  • Don't be bullied: it's your home so you can decide what you want to do. You don't have to make an immediate decision. You can think about it overnight.

In these situations, Weber says it's okay to be a bit critical: "What does the buyer drive? It's okay to judge someone by their car," he says. "Make a contract with the person that you think will most likely close. "

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