Wednesday, August 25, 2021 / by Denise Davis
The signs are everywhere -- literally.
Drive down most semi-major roads in America, and you're bound to see what looks like a makeshift sign posted on a telephone pole or stuck in the ground near a stoplight. "We Buy Ugly Houses" or "We Buy Houses," the sign says. Oftentimes, they accompany their slogan by saying they pay cash for your home in a quick sell, along with a phone number to call.
But, what's the deal with these signs? Is it a legitimate thing, or is it just another scam?
These We Buy Houses companies are essentially house flippers. They make money when they are able to buy homes below market value, fix them up to the current market standards and then sell them for a profit. It can be a good business for professionals who know what they're doing.
For you, the homeowner who is looking to sell your home, turning to a We Buy Houses company can be a good thing -- or it can be disastrous as well.
Let's take a look at some pros and cons of selling your house to a "We Buy Houses" flipping company.
Pro: It's easy
Selling your home can be quite the process. You have to clean it up, make any minor (or major) repairs necessary to get it ready for market and then come up with a marketing strategy to get it noticed.
With a We Buy Houses company, the sales process is much easier. These companies will be looking to purchase your home for the lowest price possible so that they have a margin for profit. While that may not sound ideal to you, keep in mind that you also likely won't have to make any repairs or updates, and won't have to market your home to potential buyers.
Con: The company works for themselves, not you
When you deal with a We Buy Houses company, they are only looking to make a deal that makes sense -- regardless of what that means for you. This is strictly a business transaction for them, so you won't be able to pull on their heartstrings to get them to pay more money for your home.
In addition, you won't have an advocate on your side -- such as a real estate agent -- to advise you as to how much more you may be able to get for your home if you list it the traditional way. At the same time, a real estate agent may be able to detail to you how spending some money on improvements yourself before you list your home for sale could return a larger profit to you.
Pro: It's quick
Need to get out of your house fast? If so, then selling to a We Buy Houses company could be a great option.
These companies often pay cash for the homes they buy, and they don't often ask to perform major inspections of the home, either. This means that you could complete the transaction in very short order.
Selling your home the traditional way is often a much longer process. In addition to waiting for offers from buyers -- and negotiating -- there is a built-in waiting period for the buyers to get a fully underwritten mortgage approval, conduct all inspections and then negotiate again based on the findings of the inspections.
In a best-case scenario, it often takes at least 30 days to complete the sale of a home through a real estate agent from the time an initial contract has been signed.
Con: You'll make less money
While it's never a guarantee that you'll sell your home for less to a We Buy Houses company than you would through a real estate agent, it's very likely. Again, these house flipping companies want to pay below-market value for your home so that they can make a profit after they invest in improvements.
What they offer in exchange for the lower price is cash and a quick close. While that might be nice, a higher sales price may often be worth the wait.
Pro: You don't have to pay real estate commission
When you sell a home through a real estate agent, you'll be paying a 6% sales commission for their work. This means that if the final sales price of your home is $100,000, you will only get $94,000 from the sale after the commission.
When you sell to a We Buy Houses company, it'll be like you're conducting a "for sale by owner" sale. There will be no real estate agents involved, and you will therefore not have to pay the commission. In some cases, depending on the final sales price of your home, that extra money in your pocket may make up for the lower final sales price of your home.
Con: You don't benefit from a real estate agent's expertise
There's a good reason why most homeowners bite the bullet and pay that real estate commission: They get great market insight from the agent they hire.
Real estate agents have years of experience in the market they cover. They know what a home is actually worth, what it can fetch on the open market and what small improvements can be made here and there to increase the sales price. In addition, they are astute marketers who can bring many eyes to your home.
While paying a 6% commission isn't fun, it's often well worth it in the long run. If you're real estate agent is able to sell your home for 20% more than what the We Buy Houses company is willing to pay, then the commission has more than paid for itself.
These are just a few of the pros and cons of selling your home to a We Buy Houses company. Whether selling your home to a house flipping company or listing your home for sale the traditional way is right for you is a very personal decision.
When you are planning to sell your home, it's a good idea to take a step back and assess your entire situation before making a decision. If the pros of selling to a We Buy Houses company outweigh the cons, then it's an easy decision, and vice versa.