You’ve all seen them advertised on TV and heard them on the radio, these “We Buy Houses” or “Sell Your House With No Showings” advertisements. They sound great! You mean I can sell my property without fixing anything… without listing it for sale… without getting it in “show” condition… without having to leave the house during showings… without having to haggle and negotiate? Yes, that does sound good… but if those companies would actually explain how it REALLY works, they would get zero takers.
Here’s how the process REALLY works. You contact one of these companies that you have heard advertised. They send an agent for a preliminary look at the property. They will offer a preliminary price, usually something close to market value. You are ecstatic! That was easy!
Next the buying company schedules their inspections. Five or six experts will descend on the property and go through it with a fine-tooth comb. A few days later the original agent visits with the bad news. They found a lot of stuff wrong… several pages of issues. They explain that since they have to fix all of the issues before they can re-sell, they will need to deduct from the original price they offered for the cost of the repairs. The main problem is that their estimates are very inflated. You can’t offer to have the work done yourself because they say they want it done to a particular standard and doing it yourself, or sub-contracting the work out yourself is not allowed. 😦
They add up all of their inflated line items and deduct from the original price. Now the purchase price doesn’t seem so good. It is well below market value. The real kicker is that if you continue with the process and actually sell it to them, they are only going to do a small fraction of the work items (as little as they can get away with) and leave most of the line items untouched… even though they deducted those line items from the price offered. Now there is a smell in the air because the whole process is starting to stink. 😐
Next is the issue of fees. Most regular real estate agents charge somewhere between 5 and 6% of the sales price as the listing commission. When it is listed in the MLS, the listing company advertises that they will pay approx. half of the 5 or 6% to the company that brings the buyer. When it sells, the listing company keeps the other half. These “We Buy Houses” companies charge 6 to 7% just to buy your house. So the unsuspecting seller is still paying the listing commission (even more), plus getting a price way below market value due to the inflated cost for issues found during inspections. At this point smart sellers usually walk away, after having wasted all of that time, and go with a traditional RE agent/company.
If the seller is still willing to go along with this highway robbery (losing all of their hard-earned equity… and then some), the home is purchased by the company and then listed for sale (usually slightly above market value). When it sells the company gets all of the equity as profit (plus the most of the 6 or 7% they charged in fees).
A home is the biggest investment most Americans will ever have. Why would anyone want to give up the equity that has accrued (via market price increases) and hand it over to a company just for the convenience of not having any showings? Frankly, anyone that goes this route is coming out worse than if they had been renting instead of owning. Both scenarios entails money being flushed down the drain.
Don’t be duped by how easy they make the process sound. They are making all of your equity as profits and all you will have to show for it is… you didn’t have to have any showings.
Be a smart seller. Feel free to contact me for a Comparative Market Analysis (CMA) so you can see what your house is actually worth in our current market. I am always here to help you any way I can. 919-889-1766 or kevin@kevinburrushomes.com.
Kevin Burrus Homes 