“We Buy Houses for Cash!” “We Buy Ugly Houses!” Chances are you’ve seen these signs and advertisements before. Sometimes they’re taped to a stop sign, traffic light, or in the form of a yard sign blowing backwards in the wind in your hometown. The sign might read, “We Buy Ugly Houses!” poorly written with a thin sharpie with a simple phone number, with a name, or company attached. Why the limited information? Would this person have my best interest at heart? Smart sellers ask questions, think critically, and do their research. A smart seller may wonder: who are the “We buy houses for cash” people? Are they a scam? How do they work?
Let’s take it bit-by-bit and find out.
What is “We Buy Houses for Cash?”
In the late 90s and early 2000s, “We buy houses for cash” use to be referred to as an EP – or an Equity Purchase company. The goal of these EP companies was to buy homes quickly at a fraction of the price. EPs benefit from this model because then they can turn around, flip, and sell your home at a higher price than what they bought it for from you. Eventually, they target a traditional buyer, the approach that you might be initially considering, with a safe bet REALTOR®.
An EP company targets sellers, usually in desperate situations, and appeal to their emotions vs logic. By appealing to emotions, they function by appearing to fulfill desperate sellers most immediate desire – to sell quickly. When you’re hopelessly strapped for cash, EPs might feel like a legitimate option. Although time and time again, life teaches us all the lesson of, if it sounds too good to be true, it usually is.
Essentially, when you hear EP or “We Buy Houses for Cash”, the hairs start to stand up on the back of your neck, and they should, that’s a sign for alarm.
We Buy Houses for Cash will likely try to move in on you to close as quickly as possible. Inspections, contingencies, and waiting for financing can be waived because they will try to handle everything in house. These companies who don’t prioritize client education, and as such, are unlikely to inform you of the way it could be.
What’s their goal?
Act quickly and make a quick buck – before you can see what’s truly going on.
When a company is built with ‘get people to act fast and act now’ mentality, how could they have your best interest at heart? Is it legal? Yes. Could you find something better? Absolutely. You’ll notice that We Buy Ugly Houses/EP Companies/We Buy Houses for Cash groups don’t offer free education to those trying to learn more about their services.
Don’t be fooled. The we buy houses for cash company cronies are trained in how to get you the lowest possible amount. It’s no surprise that less money for you means more money for them. Traditionally, you can be expected to be offered only 60% to 84% of what your home is really worth in the currently market. Do you own a $300,000 home? How does a $180,000 offer sound? *crickets*
How do they advertise? What do they claim?
We Buy Houses for Cash, We Buy Ugly Houses, EPs, etc. operate on one crafty key strategy – fast action through emotional deception.
Remember earlier when we discussed emotional vs logical persuasion? Don’t just take my word for it. Make the judgement call for yourself. Do any of these phrases sound familiar?
- Recently divorced?
- Upcoming bankruptcy?
- Feeling overwhelmed?
- Facing Foreclosure?
- Get a cash offer within 24-hours!
- We buy homes in any condition!
- Find relief from physical, emotional, and financial stress!
- Fair offer!
Ultimately, this begs the question: fair to “who” exactly?
These “We Buy Houses for Cash” buyers will then turn around and resell your home to a conventional buyer, for a higher sales price after closing, making a monster profit in the process by cutting corners. You’ll notice that We Buy Houses for Cash will advertise themselves as a “solution” to relieve you the burden of trying to sell your home. Some even go as far as to claim that they’re an easy, legitimate, way to get cash in days. When someone and/or something is legitimate, do have have to constantly justify their legitimacy? For example, think about it, if their title company is in their own pocket, does that feel like your best interest?
If you feel like you’re trapped in an ocean, overwhelmed, and drowning in water, We Buy Homes for Cash might look like a life a life saver. The reality? Nothing is farther from the truth.
After all, it’s hard to see red flags, when you’re wearing rose colored glasses.
What happens if I contact a “We buy houses for cash!” company?
If you contact a “We Buy Houses for Cash” company, here’s what you can expect – again notice how fast they try to get everything to happen and the emotional appeals they’ll use. They’ll try to schedule quick appointments to get someone into your house asap via call/text/email. They’ll use emotional trigger words (see bullet points above) vs logic to tip the potential sale in their favor by getting you to respond emotionally.
If they were to ask , “Are you feeling overburdened by debt or a collapsing market?” You might be likely to reply, “Yes”. If you do, here might be their follow-up question. “So what do you owe still on the house?” By asking leading questions, they’ll get you to show your hole cards first. Did you tell them that you still owe $91,000 on the home? Don’t be surprised if they start with a few thousand lower than what you owe. You can still negotiate with them here, but if you’re lucky you’ll break even.
If getting the most money (on either side of your transaction) is a priority vs selling in 1-2 days, you might qualify for a buyer agent commission rebate if you plan on buying after you sell.
If your goal is make a profit on your home, a traditional REALTOR® is still the most intelligent, and safest approach to get you the most money possible. Complete your own research, especially with someone who can connect you with a full-service realtor and/or brokerage, and weigh your options.
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