When To Use “We Buy Houses” Companies

Posted: May 2nd, 2010 | Author: | Filed under: buy my house, Sell House For Cash, we buy houses | Tags: , , , , , | 1 Comment »

When home owners are trying to sell their houses in a buyer’s market, it means some homeowners will be more desperate than other to sell their homes fast. With the number of houses on the market growing, there are businesses springing up that are focused on buying some of these properties at below market prices, then either reselling them or renting them out. These are real estate investors, who are seeking to purchase properties for their portfolio, or to flip, similar to the shows on television. You’ll see these ads on television, in the newspapers, and on billboards, screaming “We Buy Houses – All Cash” – or similar claims. What’s the deal with these companies? Are they legit? can they be trusted to get you a good deal? How much will they pay you for your home? There are a lot of misconceptions about what’s involved with these services, here’s some info about how these companies work.

The bottom line for all of these We Buy Houses offers is that the buyers want to pay the lowest price possible. In some cases, they will try to buy your house for 50% of the market price, so that they can put in the work needed to improve the property and resell it. Or, if they intend to rent the property, they will need the rents to more than cover any mortgage on the property. Many sellers are stunned or insulted at such low offers, but if you do the math, and build in a certain rate of return, which these investors are doing, the offers are only meant to reach certain business profit goals, not make the seller happy.

Not all investors will offer just 50% except in cases where the house needs work or has other defects, like a poor location. Some investors will offer 70% of the market price, but this is usually still lower than a seller might get on the market. Yet even though the price they offer might be low, usually these investors have a ready source of cash, and can close fast – they can sometimes close within a week, at which time you will walk away with your property problem dealt with and can move on with your life. They usually will also consider properties that need a lot of work or rehab, or properties that are non-conforming or have other problems, where a buyer in the retail market will be much more picky.

Finally, if you are underwater in your home, these investors usually have experience with working with banks to get a short sale, which means the bank agrees to take less than they are owed to be able to sell the property. All of this can all be worth taking less on the selling price for some sellers.

If you’re prepared to consider a lower offer to get rid of your property, this is usually how it works when you contact a We Buy Houses or We Buy Homes Quick company. First, you should call as many as you can find ads for. You will get a variety of responses, include some who just never call you back at all. These individuals will likely ask you question over the phone, and see if it’s worth their time to pursue your home. At this point, they want to know basic details about your home and the location, and see how flexible you are on price. They may decide on this call that they are not interested, but if they are, they will probably come to take a look. Be sure to ask them some questions too, like how long they’ve been in business, if they have any references, if they are also a licensed real estate agent (which they should be telling you up front). You don’t want to just let anyone at all into your home. Ask how they buy homes, and how long they take to close on a home. Don’t be shy about letting them know you are talking to other companies too.

Assuming they come to look at your home, don’t both pointing out the new paint job you just did in the bedrooms, or the new bathroom vanities. THese people are professionals, and know what they want to see. They don’t care about the things you might point out to a regular home buyer. So just let them walk through the house at their own pace, and answer questions if asked.

Once the investor decides your home is worth making an offer on, they will usually already have contracts with them. They will give you a verbal price, and if they want the home, will likely write up the paperwork right there. A word of caution: These buyers are expert at getting the lowest price possible. That means they do not want to give you time to shop their offer around. Don’t be intimidated! You should always say, you need to have your lawyer look at the paperwork, or you need a day to review the paperwork on your own. Pressuring you to sign a deal that you don’t have time to review in detail will not work out for you in the end. If they are legitimate in their offer, they should have no reason not to let you think about it. They may say they can’t offer that price beyond the day they visit, and if so, then let them go. However don’t expect them to wait for a week either. If you think their offer is fair, then be fair with them as well, and review quickly and decide. many times, investors will make multiple offers in a day or a week, so they really do need your answer quickly before they move on the next deal. Just don’t let them force you to sign a lot of paper work that you need time to review.

Another thing some investors will try to do is write up an agreement that locks you in to their deal only, for a week or several weeks. With this type of deal, they aren’t actually offering to buy the property, but rather will shop the deal around. don’t sign this kind of deal. If they are not going to make an offer to buy outright, with commitments to their price, you don’t want any restriction on being able to continue to shop your house around. Offer instead something called an option. If they take an option on your home, that means they are offering to buy at a certain price, but they don’t have to buy it. This still allows you to sell in the mean time until they exercise their option and sign an agreement to buy. Usually they should pay you an option fee, of at last a few hundred dollars.

Which brings us to the last point. Investors are also trained to give you as little down payment as possible, sometimes they will offer just $50 or $100. This allows them to walk away from the deal with almost no repercussions at all. If they are serious, make them pay more, $1,000 or more, if they promise to close in a week. Serious investors do have the cash, and know that it’s worth it to lock in a good deal. And at least if they walk away, you will have a decent amount of money in your pocket to make up for the lost time.

When you work with investors, it is a good idea to also have a lawyer look your paperwork over, because there are portions of the deal you might miss, or might misunderstand. They will also know the law in your state, and what’s appropriate and what’s not. Don’t short change yourself by skipping this step.

If you know the pitfalls and positives of using a We Buy Houses company, you never know – you might be able to sell your home fast, for cash, and walk away a satisfied customer.