When you see a We Buy Houses sign, doesn’t it make you curious? You want to know what the deal is: how they buy, what they buy, will they buy just any house? And how do they make money? Many people just think We Buy Houses is a scam. It all depends on your perspective.
There are real estate investors who focus primarily on residential homes. Often, these investors buy houses by putting up signs in target areas, and those are the we buy houses signs you see at street corners and so on. These home buyers are seeking out homeowners who want to get rid of their home – not just those who want to sell, but those who NEED to sell. If a homeowner is not in dire need, and is looking for full price, they can use a real estate agent. The investors are not going to want to work with a seller who wants full price. As investors, they need to buy low, so they can later sell high.
Generally, a buyer who is also investing in real estate is looking to buy a home well below market rate. As a result, they are looking for homes that have some kind of defect, or homes whose owners need to sell a house fast, or need to get out from under a desperate situation. Investors call these homeowners “don’t wanters”, because they just don’t want the home any more, and need to get rid of it fast. In comes the investor. How they buy is they offer to solve the homeowner’s problem by taking the home off their hands. The homeowners usually do wind up happy, because they can’t see any way out of a financial mess, until the investor comes along and offers a solution that works for everyone. The homeowner rids themselves of a problem property, and the investor gets a piece of real estate they can improve and then either sell or rent. Everyone’s happy in this win-win situation.
If you are selling a home, you should call a We Buy Houses advertisement only if you are prepared to take a haircut of at least 30% off the market price of the house. If you are under water in your mortgage, they might work with your bank to get a short sale, where they offer the bank less than is owed. If your house needs a lot of work, they will take that into account when making an offer. But if you want full price, or close to full price, these investors are not going to work with you. They have to build in not only the costs of turning the property around, but also a profit. They don’t want to live in your house, just sell it.