What’s The Deal With We Buy Ugly Houses?

You’ve seen the billboards and newspaper ads, the signs that say We Buy Ugly Houses.  What exactly are they talking about, and is it something that can help you?

When a company runs an ad saying they want to buy ugly houses, they’re talking about buying fixer uppers, houses that are old, run down and need work.  These buyers are looking for deals, because they know in this market, it will be hard to find bank financing for a house that needs serious repair.  But investors have access to cash lenders who will finance the repairs, and then they can resell the fixed up house at a profit.  Sellers who have houses to sell that need lots of work are always looking for a way to sell the property, because the average owner occupant is not going to want to buy a house that needs significant work.  Often, the seller can’t afford to do all the repairs themselves in order to sell the house, or they don’t want to do the work. Senior citizens, estate sales, or families with young children often have limitations or other reasons they can’t get involved in major repair jobs.

When an investor steps in who specializes in fixing up houses, they will offer a very low price to the seller, because the buyer need to factor in the cost of repair, hiring contractors, the supplies needed, and the months it will take to do the repair. The investor is usually making monthly payments on their rehab loan which have to be covered in the price. When you add to that a profit margin for the investor, it means the price they can offer a seller will be well below market.  Many times, these investors will deal with home sellers who are completely unrealistic, and expect a market price for a house that needs more work than is worth investing into the home. This means that if the house buyer pays a market price, plus then has to pay tens of thousands to fix it up, their sunk costs will be far higher than what they could ever sell the house for.  As a result, investors who buy are looking for a cash house will never pay market price.

The other thing about the we buy ugly houses ads is that many times, sellers will call these ads even if their house does not need repair.  These investors can buy houses fast if a seller is willing to take a discount.  While a low price will be offered if you want to sell house for cash, if the house doesn’t need a ton of work, it still might be accepted to a desperate seller who needs to get the house sold.  If you really need someone to “buy my house” fast, it’s worth calling as many of these ads as you can find just to get comparisons.  Whatever you do, don’t let the investor who comes to your house convince you to sign any paperwork until you have a chance to compare deals, and have time to look over the paperwork.  Often, these property buyers will tell you they can only honor their deal the day they are there at your house, and want you to believe that if they leave, you won’t later be able to take their offer. Don’t respond to pressure tactics.  If you are willing to take a good deal, that investor will still be interested, or you’ll be able to find someone else willing to buy your house.