What it means when they say ‘we buy your house for cash’

By Joni Ribera, Let's Talk Real Estate

  • Tuesday, February 26, 2008 2:29pm
  • News

By Joni Ribera, Let’s Talk Real Estate

I recently had someone ask me what to do about their home that had been on the market for eight months.

The seller had transferred to another state and now had two mortgages. They wanted to know about those “buy your house for cash” operations, how these businesses operate and how much they typically pay.

Most of these companies are legitimate and basically play the role of a fast-acting, lowballing investor. The larger buyers have a good credit line and can close deals pretty quickly. But they usually pay less than smaller investors — sometimes much less.

Still, these businesses have a broadening spectrum of customers in today’s market. Sellers range from those trying to avoid foreclosure or who are selling off recently inherited property to those who are retiring, right-sizing or going through a divorce. These sellers also include those who are caught in less-than-desirable mortgage structures or who owe a multitude of back taxes. Or as in your case, they may be transferring jobs.

Some sellers don’t want to go through the hassle of multiple repairs and welcome the convenience of a quick disposal.

The pluses are that such operations pay cash, move quickly and buy “as is.” Many will also pay most standard closing costs. The minuses are the deep discounts they command.

What do they pay? That can vary widely. Most of them use software to analyze how much a home will cost to repair and how much to offer for it. Officials of such operations have told the media in the past that their aim is to buy at about 65 cents on the dollar, although in some particularly depressed markets that number has dropped to as low as 50 percent, particularly on condos. Some will merely try to gauge how much equity you have in a house and offer that — and little more.

As you might expect, these are some of the lowest of the lowballers out there. The deep discounts, they say, allow them to renovate the place, pay for utility and maintenance costs while it’s under renovation, and market the home once it’s ready to resell. When these homes are repaired, the firms or their franchisees typically resell the properties to new owners and other investors, or add them to their rental portfolios.

These days, more and more of these “opportunity investors” are cropping up. The big and established ones such as the heavily capitalized HomeVestors focus mostly on starter homes and rental homes.

How does the process work? Representatives will come to your home, give it a thorough and free inspection, make their assessment, then make you an offer — usually within a few days. The offer will be limbo-low, of course, and they expect you to haggle.

Be sure you make at least a couple of counter-offers if you are going this route. If their low offer doesn’t offend you, your return offer won’t offend them. But make sure you check with the Better Business Bureau before making any commitment. There are more and more scammers out there. Ideally, the company will belong to an organization such as The Master Builders Association.

To employ an overused term, these companies “are what they are.” Most non-distressed sellers won’t bite at their offers, however. You may be better served by reducing your price, finding a midpoint between their offer and your current asking price. That should bring you a buyer rather quickly in our market.

Contact Federal Way real estate agent Joni Ribera at (253) 632-5779 or jribera@windermere.com. Also visit www.JoniRibera.com.

More in News

Federal Way Public Schools hosting second annual STEM night

More than 80 booths will be on display, as well as representatives from higher ed programs.

Dr. Shannon Hader, a candidate for the 8th Congressional District seat, fields a questions as her opponents, Jason Rittenreiser and Kim Schrier, look on during their debate in Auburn on March 16. ROBERT WHALE, Auburn Reporter
8th Congressional District Democrats weigh in on issues in Auburn

Candidates discuss health care, economics and the opioid crisis.

Federal Way Police respond to bank robbery Friday afternoon

Officers also arrest suspect trying to break into vehicles.

Federal Way man taken to hospital after shooting, father in custody

Shooting took place Sunday morning at townhomes on Campus Drive

Proposed utility tax vote stirs debate

Council expected to vote on issue at meeting Tuesday, March 20.

Federal Way Public Academy students call for end to school violence

Organizing a walkout a learning experience for seventh-grader.

Aggressive parents confront mother of alleged bully

Police also respond to report of firearm left in coffee shop.

Sheriff’s office warns of kidnapping scam

Parents report receiving call demanding money for child’s return.

Decatur High students march for change in walkout

We Act Club organized Wednesday event.

Most Read