Let’s jump right into it, what are the cons of we buy houses companies, it can’t be all great right?
- It’s not for everyone
If you have a house that is in great condition and you can list it on the MLS for market value, selling to an investor isn’t what you want to do.
You want to work with a realtor or try selling it your self as for sale by owner.
I am not saying investors won’t by houses of the MLS at market value some will, and it can be a great option.
However, most investors are seeking a higher return on their invested capital, and other methods are more favorable.
If you have thought about selling your home yourself, read this article to see if its right for you.
- Selling Price
As I explained selling your house to we buy houses company isn’t for everyone and all situations.
If you have contacted or will contact an investor in the near future. It’s imperative that you understand that investors seek to purchase homes at a discount. Usually at least 30% of the after-repair value (ARV) minus costs of repairs.
So, don’t be shocked or discouraged if the offer price isn’t what you thought it would be.
Houses purchased by investors are usually deeply discounted allowing the investor to earn a profit. Many things can and will go wrong during rehab, so enough cushion needs to be present to protect the business.
Even so, many investors find themselves losing money on properties from unforeseen circumstances.
Homeowners must understand that getting a high selling price isn’t the advantage of working with we buy houses companies.
The condition of your house will determine the cash offer you receive. If you follow the simple 70% rule you can get a general idea of what an offer would be.
As a homeowner, you shouldn’t feel defensive or angry at an offer. At the end of the day, it all comes down to numbers.
The offer is no obligation, so if you don’t like it find another investor it’s that simple.
- Your Losing A Home
The factor of the matter is when you sell to a we buy houses company you could be losing a house that is dear to you and has been in your family for years.
If you recall from earlier in this article, I talked about distressed houses and homeowners.
Often times investors purchase homes from families that are facing tough circumstances. Whether it’s going through foreclosure, divorce, behind on taxes or inherited property, etc.
It’s not an easy situation for homeowners to handle and chances are you are selling a home that you wanted to keep.
Although selling your house will in many cases help you financially and relieve a lot of stress and anxiety. It doesn’t change the fact that you are selling your house.
To put it into perspective. My wife inherited a house from her great grandmother when she passed. She lived there for several years after she graduated from college and started her career.
After moving to a new house, she wasn’t able to sustain paying the taxes on her inherited house. Consequently, she fell behind on her taxes and ran the risk of the city taking her home.
An investor contacted her about selling her house for cash and she agreed to the offer.
Although she was able to unburden herself from the house it was at a cost that wasn’t financial.
It has been 7 years since she sold her house, but lingering regrets still remain.
My wife was and still is attached to that home, she has a lot of fond memories of her great grandmother there. Our goal is to buy the home back one day.
We buy houses companies offer a great service, but at the end of the transaction, you are losing a home.
- You Don’t Always Know Who is Buying Your Home
Often times when homeowners work with a we buy houses company they only see one or two people representing the company during the transaction.
You might get a false sense that they are the actual people buying your home.
In many circumstances yes, they are buying your home outright with cash reserves.
However, many wholesalers are selling their interests in the property to other investors that you aren’t aware of.
Does this affect the validity of the transaction? No, but its information worth knowing.
Most consumers aren’t concerned with where and how their new iPhone is made. They just want a great product that functions and works as advertised.
- No Licenses Required
Unlike real estate agents, cash home buyers aren’t required to have a license in most states.
Although having a license isn’t needed there are many we buy houses company owners and employees that do have a real estate license.
There are cash buyers that use their licenses to close transactions with homeowners only charging a 1% fee instead of the traditional 3% fee by real estate agents.
- Potential Scammers
In any business or industry, you are going to find people who operate unethically to get ahead.
There is always someone looking to take advantage of you regardless of what your situation is or who you are. Unfortunately, this is apart of life and business.
Here are some ways to see if you are dealing with a scammer.
- Do your research: Because a company is new it doesn’t mean that it’s a scam all companies have to start somewhere. Also, if a company has been around 10 years doesn’t mean that they have good business practices either. Do your research check the Better Business Bureau (BBB), Google, and any other resources you have available.
- Know what you are Paying for: Check for hidden fees. It’s common in many industries to hide fees within contracts. You are quoted one price in the beginning and end up paying a higher one.
- No in-person visits: Technology has come along way but when working with a cash home buyer a representative of the company needs to be there to evaluate the property. This isn’t the type of business where you can totally take away in-person interaction.
- You get a bad feeling: This isn’t technical and there is no science behind it. But if you are working with a cash home buyer and you are uneasy, trust your gut instincts.
- Ernest money: Make sure the cash home buyer provides proof of funds and an agreed-upon earnest money amount.
- Offer too good to be true: There are times when investors pay too much for a home. But if you know your home is worth $70,000 and you get an offer for 3 times that, something isn’t right. Your best bet is to walk away and not get excited about a big payday.
- Never pay an upfront fee: A legitimate sell your home for cash business will not require upfront fees.
- Too eager to send the buyer money: If a cash home buyer is willing to cut you a check for a property they haven’t seen or evaluated. This is a red flag and you should stay clear. Don’t get caught off guard with the promise of a big payday.
Now that you know the cons of working with a cash buyer. Check out this article to see all the reasons why you should choose to work with an investor.
Conclusion
We buy houses companies can be a great option for you depending on your situation. However, its not a one shoe fits all way of selling your home.
This article will dive deep into what you should look for when working with a cash home buyer.
DO YOU LIKE WORKING WITH SCAMMERS?