I’ve seen lots of ads from various companies promising that they’ll buy up a house “fast for cash”. Are these legitimate companies? Is this just some sort of scam? Do they offer ridiculously low prices on homes?
I think they are flippers. Probably if you sold your house the regular way, you would get more. I know one person who is in a real estate investment group, and they do this, although a little more elegantly than putting signs on telephone posts.
Something has to pay for all that pushy advertising, and for the risk inherent in paying cash for a house immediately instead of waiting for an actual buyer. Conservation of money in this case means that the average price this company pays has to be less than a home seller might get if they waited.
But, sometimes you need cash now or you’re going to lose everything or even die.
Yes it’s ridiculously low prices being offered.
We’ve got one in town that city council would love to see the last of. Yes, they are flippers. They usually buy a home for less than it is really worth because the seller hasn’t got the time to wait for a buyer, or can’t afford to put the house in tip-top condition. Often, they are preying on someone with medical bills or other debts.
If there are local laws about flipping (can’t sell a home less than six months after you buy it or can’t sell multiple homes in a short time frame for example), they’ll turn it into a rental unit. Otherwise, they just give it a spit-shine and give it the cheapest repairs possible to make it look good and then they shove it back on the market at a profitible price.
I’ve seen a few of them around here. The typical seller is an older owner (or the heir of an owner who died) who wants/needs to unload the property. The house is typically tired and in need of new paint, carpeting and other upgrades. The buyer offers no more than 1/2 - 2/3 of the market value of a fixed house. But from the seller’s perspective, it’s a quick, no strings attached sale. The buyer dresses up the property and hopes he’ll get market value for it
While there might be some income tax issues for investors re flipping I’m not aware that any municipality anywhere in the US has the power to dictate how much real estate you can buy in a given area or how fast you can re-sell it.
I think they could also just be corporate buyers, who will end up renting them out, which is a trend that has increased a lot since the housing crash and all the people losing their houses. My understanding is that (in California, at least) while the purchase of housing is going up now, the increase is largely due to these big investors who are paying cash for large numbers of houses.
I once got an email solicitation for a commercial “rental” real estate offer (I think around $200 million) that at first I thought was an apartment building, somewhere on the East Coast. (Why I received it I don’t know.) When I looked at it more closely, it was just a bunch of scattered houses in part of a medium-sided city–all being sold together as one investment.
Not to go too far off topic, but I had a recent encounter with a “guaranteed sale” real estate broker.
I happened to be looking at a very, very good newly-built never-occupied house in an excellent area but could not want to pay the extremely high price they wanted. To kindly refuse, I told the agent (a reprsentative of the nationally known builder) that I liked it, but needed to sell an existing home, and since the market is so slow, it would take too long to sell and this fine house would no doubt be gone by then. Sorry, I can’t do it.
She says “Oh no, we have a broker that we work with who guarantees the sale of your current home in 90 days or they will buy it.”
Long story short, I talk to this guaranteed sale guy, mostly just to find out how it works.
So here it is: He would first price the client’s home at 5% below what he deems to be the current “fair” market value to “motivate” buyers. Of course, the client could end up with an offer that wants you to take of another X% on top of the 5%. If it doesn’t sell in 30 days, they take off another 5%. Now the client is at 10% below market. And if it doesn’t sell in 60 days, take off another 5% --they’re now 15% below market. If it doesn’t sell in 90 days, take off another 5% and then the broker writes the client a check for 20% (one-fifth) off of the previously agreed to “fair” market value. The broker then owns the home and sells it at his leisure; if he sells it at 90% of market value, then he’s pocketing 10% for himself. …Plus commissions… Around here, commissions can be 6%.
We used to get a lot of those letters when we lived at our previous house. One of my neighbors was curious so she spoke to the sender. They were offering a ridiculously low sum for her house. She said that they were offering less than $200,000 when the same houses on the open market would go for at least $400k for an unrenovated one and a lot more for a renovated one.
My brother-in-law did this for awhile. He had the signs, webpage, bumper stickers, fridge magnets, you name it. It’s not a scam, he just wanted as many contacts as possible. He only bought the houses he wanted to buy, of course, but it wasn’t lowball figures necessarily. If he could find people who needed to sell quickly or whose house needed some work first, there were things he could do that make the sale happen to everyone’s advantage, including his own. It’s not a scam if I need to sell my house today and someone comes in with an offer that is lower than what I want.
Inventory in the Bay Area is very low, and sometimes we get letters from legitimate brokers, ones we know. I think they do it to try to get first dibs before someone talks to another agent. But I’m sure the telephone pole ads are for flippers.
BTW, who doesn’t sell their house for cash? Someone get green stamps instead?
That generally means the seller doesn’t have to take out a mortgage or get approval from a bank to pay for the house. They have the funds immediately available.
The mascot for this venture has become a familiar face on billboards around here, and I gather other American cities.
I find him strangely reassuring - sure he’s a caveman, but a friendly one who only wants to help. (But wait’ll he moves in next door to you and marries your daughter.)
True. The big advantage to cash is that even if the buyer is pre-approved, a bank is going to want an inspection and assessment by an inspector and assessor that is on their trust this person list. Not only will it take time to arrange, the inspector may find things that the bank will want fixed before they approve the loan. And they’ll want to re-inspect after you or the contractor is done.
If you’re trying to unload fast, arranging all of these things will slow you down and cost you money.
In the Bay Area, last year at least, there were tons of investors who paid cash, and paid full price or more also. They indeed had an edge. Sell your house quickly I get, the cash may imply it but doesn’t say it.
When the market crashed last time the flippers got soaked. We can only hope. The “flip houses for money” ads have reappeared on the radio.
Bolding mine.
If the seller wants to take out a mortgage for me and pay it, I’ll be glad to buy his house. 
I suspect you have the wrong word there.
You can sign over house over to them and get no cash at all out of it, but avoid having it repossessed. I know that is how some of them work at least> I called several when I was getting behind on payments a few years ago.
I have to say, I’m not a big fan of flippers. When I was house hunting it seemed like every place I looked had just had some cheapo granite slapped into the kitchen because that was the thing to do, obviously. Never mind the skeevy plumbing, you can’t see that. Now I like granite just fine when it’s well done and in somebody else’s house. I don’t want it. But that’s what the flippers were doing back in 2007.
On the other hand, selling a house is just a whole bunch of hassle. Really, just totally annoying. You have to get rid of 3/4 of your stuff, keep the place in museum-quality pristine condition, eliminate all signs of your pets (not to mention the pets themselves), be ready to vacate so someone can see it with 20 minutes’ notice. Having someone just buy the house, okay, not top dollar but on the other hand no hassle, seemed very attractive to me at a certain point. Not that I did it, but I see the attraction.