Is “We Buy Houses” a Scam?

Posted on Posted in Sellers

I Need to Sell my House Fast for Cash!

If you are reading this, chances are you’ve seen the “We Buy Houses” ads that offer to buy your house fast for cash and for a fair price.

I think you’ll agree that it is hard to sell your house without spending your hard earned money on repairs and waiting months to find the right buyer.

With so many of these companies flooding us with advertising, it is easy to wonder if this non-traditional method of selling your house to an investor for cash could be a scam.

How can these companies just write a cash check and why do they not use realtors? How can they close so fast and are they trying to rip me off?

In the rest of this article I’ll try my best to explain what exactly these companies do and if it truly is a scam or something that may be worth checking out.

 

Who or what is “We Buy Houses”

“We Buy Houses” is a common term that many professional homebuyers use as way to attract attention. They are usually individuals or groups of individuals interested in investing in houses. This usually includes either buying, remodeling, and then selling the house on the market, or renting the house out to a tenant. They make a profit either when they sell the house on the market 4-6 months after rehabbing it if they’re lucky, or through rent each month from the tenant. However, much of that profit from renting goes back into the house for repairs and upkeep. If you want to get an idea if the company is legit or not, it is a good idea to ask them what they plan on doing to the house once they buy it from you. A professional company will always be honest and upfront with their plans for the property.

 

Why Do These Companies Buy Houses in Cash?

If you are dealing with a reputable company, they will offer cash because it is the easiest way for them to purchase the house and allows the homeowner to sell quickly if they need to. A legit company will not pressure you to sell fast but will be able to close whenever you are ready. Cash allows the homeowner to skip the appraisal process from the bank along with the standard three month waiting period afterwards. Reputable companies would never have a problem securing a loan from a bank but most choose not to in order to offer the best value they can to the seller. This is also why some companies are able to close within 10 days.

 

Why and How Do They Buy Houses so Fast?

Sell your house fast! We buy houses and close within a week! Sound familiar? On the surface this may sound like a scam but the truth is that a week is usually the minimum amount of time it takes to do a title search on a property. Any company offering to close in a day or two is blowing smoke and just trying to get your business by being untruthful. A professional company will be honest with you right at the start. A company that responds to you quickly and makes time to meet with you as soon as possible will usually act fast in other ways too. If you are looking to sell quickly make sure the company you are dealing with has your best interest in mind by acting quickly themselves.

 

Why Do People Sell Their House for Cash?

People use professional home buying companies for many reasons that are beneficial to them. Many people are not able to or just don’t want to repair and update their property to perfect condition so they can have a chance of selling it on the market. Life changes such as divorce, an inherited property, job changes, medical issues, financial hardship, etc. can have an impact on a homeowner’s willingness or ability to go through the traditional channels of selling a home. Repairing and updating the property, finding a realtor, showing their property to multiple people, waiting on the right buyer, waiting on the buyer to secure financing, and waiting on the property to close are all time consuming and money draining processes than can hurt more than help some homeowners. This is essentially why professional cash home buyers exist. They create value to the homeowner by avoiding all these stressful situations and hoops that a traditional homeowner has to go through. Instead of realtors, banks, and mortgage companies all getting a cut of your money by demanding fees, commissions, and interest; professional homebuyers provide an easier and faster way out. A professional home buying company should strive to create win-win situations for both the homeowner and themselves. They offer cash because it is easier for them and ultimately for the seller as well. Be weary of home buyers that don’t offer cash because it may take them longer to purchase your house, especially if they have to go through the loan process.

 

Why Don’t They Use Realtors?

This one is simple. Realtors are middle men and women who demand fees and commissions at closing. Even if you find a buyer yourself, you still have to pay the realtor you signed a contract with. Avoiding realtors allows the home buyer to offer more to the seller.

 

What to Avoid When Selling Your Home

 

Avoid national companies. National companies and franchises are not the best way to get the most for your house. You can usually spot them using expensive ads at the top of Google search, large billboards, tv ads, and radio ads in your area. These companies work all over the nation and rely on quantity instead of quality when it comes to making offers. They usually do not know the seller’s specific local market and how much they should actually offer. Because of this, they make thousands of low-ball offers to keep them in business.

 

Avoid wholesalers, sometimes. Some companies or individuals are only wholesalers and not actual buyers. These are usually national companies or simply individuals looking to make a quick buck. What this means is they will make you an offer and if you accept they will sign a contract with you like normal. They will take your contract and try to find another company to buy that contract. This means they are essentially acting as “middle men”. They will usually get a fee from that other company when they sell them your contract. This is legal if it is written in the contract and not actually a scam. However, it may be something you want to avoid. You will still get payed the full amount agreed upon at closing, but there may not be a closing at all. The wholesaler (original signer of the contract) may leave you waiting weeks or months while he or she looks for a final buyer to buy the contract. If the wholesaler doesn’t find a buyer then your contract could expire leaving you back at square one. You may get a lower offer than an actual buyer because the wholesaler has to sell your contract for an amount above what the two of you agreed upon. The difference in the amount is the fee that the wholesaler takes. Be sure to ask any company you deal with what they plan to do with your contract. If they are honest with you and tell you they are a wholesaler, make sure you are happy with the original offer and make it clear in the contract the time-frame in which you are wanting to close on your house. In some cases, it may be easier and quicker for a seller to use a local company that can purchase your house personally and not a franchise or national company that may leave you hanging.

 

Avoid unsecured websites. Check the company’s website and make sure it is secure if you plan on entering your information. You can check this by looking at the url in the address bar. An icon of a lock should be appearing on the left of the website name. If you are using the Google Chrome browser, it will even show you how secure it is if you click the lock icon. This icon means information transferred to and from the website is encrypted and can not easily be hacked. While there are never 100% guarantees on the internet, your personal information will be much more safe and secure on one of these sites. If you are ever in doubt, it is recommended to call a contact number instead.

 

Avoid Spammy Websites. Avoid websites that look like it’s shouting at you with bold text and loud colors, with arrows pointing to forms littered throughout the page. Chances are the people you are dealing with could also be loud, obnoxious, and as cheap as their website. It’s not always the case, but if a website is clear, concise, adequately informs you, and provides many avenues for you to get in touch, the company is more likely to act the same way.  

 

Avoid Automated Voice Messages or Call Centers. When you call a number listed on a website, chances are it will either lead you to a automated voice message system, a representative at a call center, or an actual person who works for the company you called. This is a tricky one. On one hand, leaving a message in an automated system or leaving information with a rep at a call center can be easy and quick. On the other hand, you don’t really know when the company will return your call or if they will EVER get back to you. Not reaching an actual member of the company can be frustrating and lead to uncertainty. It may be more beneficial to go with a company that has an actual person answering the phone, and preferably, that same person can work with you through the entire process of selling your house. If you called a reputable company, that person will be a reliable source of everything you need to know or do in order to sell your house.

 

Avoid high pressure tactics and weird phone calls. Selling your house should not feel like walking into a used car lot and being hustled by a loud, obnoxious salesman. If someone is being rude on the phone or trying to pressure you in any way, hang up and try someone else. If anyone is trying to scare you into selling your home before it’s too late, avoid them at all costs. These people are desperate and may put their own selfish interests above your own. This is an obvious thing to say but a professional company will sound, act, and look professional. They will ask about your personal situation, your needs, and help you based on those needs. Selling a house to a professional home buying company should be quick, easy, and profitable for both the seller and the company.

 

So is it a Scam?!

If it is a reliable and reputable company, then it is not a scam. These companies provide a service for a specific homeowner who needs to sell their house using unconventional means. A professional company will make you a cash offer based on the value of the house in its current condition. This offer takes into account the repairs needed, the labor costs to fix it, the surrounding neighborhood, and the expected profit for selling the house at full market value. They will also act quickly to make the process as convenient and easy as possible.

As with any company though, you need to do research to make sure it is a real and reputable company. Call or contact them and watch for warning signs like high pressure sales tactics. If they are not acting quickly or returning your phone calls, avoid them and try someone else. Ask questions and make sure they are working for your best interests according to your specific situation and needs. Most good, professional home buyers are trying to help homeowners, improve neighborhoods, and also make a profit so they can continue to do what they enjoy.

If you need to sell your house quickly, keep this article in mind. You’ll be able to sort through who’s real and right for your situation, and who to avoid.

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