What’s the deal with We Buy Houses Companies that pay with cash?
Do they have the best interest for you? What’s their catch?
This definitive guide will help you separate the facts from fiction and educate you on what to look out for. Read on to learn more!
We Buy Houses Companies that pay with cash are an entity who buys homes in your area. In some cases they may pay cash for the home.
Sometimes they’ll finance the home and take it as a tax write off. But the fact is that We Buy Houses Companies that buy homes for cash will, simply put, pay you cash. It’s that simple.
What exactly is a house-buying company?
A house-buying company is a company that would buy a person’s old or unwanted house and provide them with the cash. The company will then either sell it to someone else, renovate it or do some sort of renovation and then sell it.
These companies can be fantastic for individuals who have a house they are not using, either because they want to purchase a new one or because they need the money.
People who have a house they are not using and want to get rid of can list it on these companies’ websites, where interested buyers will look for houses to purchase.
These companies then take a commission from the sale price.
It is also possible to find real estate investors who will buy houses directly.
If an investor wants to purchase a house for particular reasons, such as flipping it to sell as a rental property, they will likely be looking for houses in particular price ranges and with specific features.
Notably, many of these We Buy Houses for Cash Companies will buy ugly houses as well as pretty houses. Distressed properties do not scare away these investors.
In the past, investors had to use real estate agents in order to find properties that they would like to buy.
The high fees required by most real estate agents when selling a house have driven many home sellers to sell their house on the Internet.
Alternatively, many of these We Buy Houses for Cash Companies buy properties directly from people who want to sell their houses without a real estate agent.
This ends up being a win-win for both parties.
Here are some examples of house-buying companies:
1. Those that buy your house then flip it
These are the types of companies that will purchase your home for a reduced price, then flip the house after they’ve made some renovations to the property. They will typically be looking to renovate areas like the bathrooms and kitchen, plus any mechanical repairs. They might also look to change the layout of something like the main living area.
They will make a profit from the sale of your home, and you’ll be able to move on with your life.
The process is relatively simple for both sides. The purchaser buys the house at around 70% of market value, then renovates it and resells it at a higher price.
You’ll receive a check for the difference between the selling price and what you owe on your mortgage in addition to the amount of money from your sale.
2. Investment companies
Investment companies are going to take a slightly different approach.
They will purchase your house, make renovations, but then hold the property as a rental. This is done to diversify their portfolio.
This is also done to avoid any possible depreciation.
These companies are similar to the house flippers. They will acquire properties that give them the ability to give them enough cash flow to make the investment produce a good return.
There are plenty of larger companies that are even publicly listed companies that take this approach. However, there are also a lot of local investors who will take the approach to produce a long-term portfolio for themselves.
Generally speaking, these companies tend to focus on multi-family units, such as a duplex or triplex. If you are selling a Single Family Residence, you might have a hard time finding a larger company that is taking this investment approach to purchase your home. A smaller company that is doing this method might be more than happy to work with you.
You can see that this would be a great investment for an investment company, but it might not be so good for you.
They might be able to afford fixing up your house, while you might not have been quite able to do that and afford a separate mortgage.
iBuyers are larger companies that will purchase your house through some app that they’ve developed. Some examples of these companies are Zillow, Offerpad, and OpenDoor. They will pay you on the spot for your house, and they’ll deal with all of the paperwork.
In most cases, iBuyers can close in as little as 14 days.
The major downside is you’ll usually receive less money than you would have with a traditional sale.
iBuyers will charge fees in order to purchase your house, but this also means that they will make an offer on your house closer to the fair market value at the time.
Their fees typically hover around 6%-7%. However, iBuyers focus their efforts on the sellers who own homes that are already in very good shape.
Another major downside is they aren’t likely to deal with a seller whose home needs several thousands of dollars in repairs, or has something like a lien on the home.
Once they receive your request, they will analyze the property, then give you an offer. After you accept the offer, they will send out an inspector to make sure the property is up to their standards.
Keep in mind, the iBuyers will want to do an inspection and may even ask for a termite inspection, which you would want to have done ahead of time. If they still want the property, they will go forward with the closing.
Due to the nature of these iBuyers being located in larger metropolitan areas, they probably won’t be likely to do business with anyone in a rural setting.
What Do We Buy Houses Companies Do?
We buy houses companies offer house owners a way to sell their property by offering them cash. The amount of cash can vary between companies, but it is usually a good value. The prices may also vary depending on the condition and type of the house. For example, a home that is in good condition is worth more than a home that needs repairs. Some companies buy houses in bad condition and then fix them up before reselling them at a higher value.
These companies are often working with people who are in distressed situations. These kinds of properties and situations can be things like:
- Property that is obtained in a divorce
- Property is in pre-foreclosure (or foreclosure)
- From Inheritance
- Needs a lot of repairs
- Has a lien
- A property that’s underwater on the mortgage
- Or the owner simply needs a super quick sale
Are We Buy Houses and We Buy Ugly Houses the same thing?
Yes, these companies are the same kind of company.
A company that advertises saying, “we buy ugly houses” is the same thing as a normal cash buying company we mentioned earlier.
However, they tend to focus specifically on houses that are in deeply distressed situations and might not always be willing to purchase a home that is already in good condition.
They’re always willing to buy houses, but they might have a different focus of what kind of property they are looking for. For example, we mentioned before that some companies would only want to buy homes that were in extremely poor condition.
This means the homes might be located in underdeveloped neighborhoods with a higher crime rate and other factors that go along with those areas. They probably wouldn’t be looking to buy properties that are in good to great condition.
How Much Money Will They Buy My House For?
The answer to how much money they will buy your house for is related to what the property you are selling is worth. The value of your home will fluctuate based on the neighborhood, the condition of the home, and other factors such as how much money you have invested in home improvements.
This is where a real estate agent, or broker could be helpful. They will provide you with a comparative market analysis which will give you an idea of the value of your house in today’s market. However, they might also make demands that you are unable to meet.
Typically, when you are working with a realtor, you will be required to handle repairs to your house before they are willing to list the property.
If you are unable to afford said repairs, then you are likely to be stuck in your current situation. So, is there a way that you can sell your house fast with no realtor?
Well, yes in fact. Selling your house to one of these We Buy Houses companies is a great option for some people.
However, you need to know how they will calculate their cash offer for your home.
Otherwise, you might just feel offended that they’ve offered you something much lower than you feel like you would have gotten for it by listing it on the MLS.
How will they determine the cash offer to buy your house?
Typically, these companies will purchase your house for 50-70% of the fair market value, minus the repair costs. This is the common investor formula that the vast majority of these companies will use.
An example is if your house has a fair market value of $150,000 and needs $20,000 in repairs, you will likely get an offer somewhere in the ballpark of $77,500.
The breakdown of the math is: 150,000 x 65% – 20,000 = $77,500
The company brings in an appraiser to determine the market value of the house, and offers you a price that is determined by this appraisal. You then counter the offer and negotiations begin.
When you are in a negotiation, it is important to remember that there will be compromises made on both sides.
This may include accepting a lower price than that which you had hoped, but it will also include receiving a higher price than the investor originally offered. However, you may be fine with their offer and accept it on the spot.
Either way, these companies are used to negotiating with people all the time. They will not be offended if you enter into a negotiation with them.
If you are considering working with this kind of company, you should be well prepared to hear an offer that is well below the market value. The trade-offs, however, offer plenty of benefits.
Why Would I Want to Sell My House For Cash?
Some people do not have the time, patience or desire to put up with the hassle of a long house-selling process. These people may want to sell their house for cash because they want to make the whole process as simple and quick as possible. In addition, some people may not have enough time to fix up their house before putting it on the market.
Why put in all of that effort when you could just sell your house for cash from a reliable source? By selling your house to someone who is willing to buy it without making any big repairs, you can get out of the process and move on with your life.
Obviously, there are major pros and cons to working with any of these companies who buy houses for cash. Here are a few:
Pros of homebuying companies
Full Cash Offer
You will be paid in cash for your property according the investor formula of 70% FMV (Fair Market Value) minus repair costs. Receiving a top cash offer on your home can save you additional time and stress because your buyer is not going to a mortgage acquiring process, which can cost you a lot of time.
This can also save you more headaches because you have a guarantee of cash in your hand and your buyer is not going to back out at the last minute because the bank denied their mortgage.
Speed of Process
Most companies will be able to close quickly on a property and will let you choose the closing date. However, if your property is especially unique or you want to take extra time to sell other properties (to have a bigger down payment), you can ask the company for an extended closing date.
No Repairs Needed
You will be able to sell your house in as-is condition. No repairs will be needed for your property, which greatly decreases your stress and increases the speed at which you can sell.
No Questions Asked
You will be able to sell your property to these companies without having to show the house and field 10 questions from the potential buyer.
Rental Properties Are Fine
Maybe your a landlord and need to sell off a property that has been hurting your stress levels and your bottom line. These kinds of properties are find to sell to house-buying companies.
Ease of the Process
Ease of the process might be one of the greatest benefits to working with one of these companies. Most of them will have you fill out a form, they will analyze your property, and generally will give you an offer within 24 hours. From there, you will negotiate a final price, then sign some papers and close on the property. After closing, you’ll receive your cash check. Its a simple process.
No Wasted Time
The average home sits on the market for 68 days. That’s a lot of time that you could be moving into your new home or investing your time and energy elsewhere.
Your Decision Making Is Simplified
When you’re selling a home, you’re having to make multiples decisions all the time. What realtor are you going to choose? What price are you going to list at? Do you want to make all the repairs they recommended? Do you want to make any repairs?
The list goes on and on. With selling to a cash buyer, you are narrowing down your decision making to a single decision.
Not needing an agent does a lot for you. You are not waiting around for them to market and sell your property and not having to work with them as they show your property. Additionally, you will not need to pay any commissions which are around 6% of the final sale price. Additionally, you will have to pay closing costs which are fees paid to the attorney handling the paperwork.
They Can Handle Foreclosure
We Buy Houses companies are not scared away by a pre-foreclosure situation. In many cases, these companies can help you avoid foreclosure by purchasing your property before the bank is required to activate the foreclosure on the house. This can greatly help you avoid a terrible blow to your credit score and borrowing ability in the future.
If you are having trouble with your mortgage payments, then these companies can save you a lot of financial headache in the long run. Many We Buy Houses companies will even negotiate to lower the price based on your financial situation. They can also provide you with cash for the house that you will be able to use to pay off other debts or even just get back on your feet.
They Can Handle Underwater Properties
If you are deeply underwater on your mortgage, these companies can help you pay off your mortgage and pay off any back payments that you owe. They will also help you work out a plan to pay off your home in the long run. You can get rid of that underwater loan by selling off your property to these companies.
Cons of companies that buy houses for cash
No Market Competition
Because you will be selling to a company that is purchasing your house fast, you are sacrificing the bidding competition that you would normally get if you were selling your house on the MLS. You will definitely make a higher profit if you were to sell on the MLS, but trade-off is greater stress and a longer holding time on the property.
Less Profit To Be Made
If you sell to companies that buy houses for cash, you will probably get around 70% of the sale price that you would’ve gotten by selling your home on the MLS. This is because these companies need to make a profit for their service, but they offer you convenience and can buy your house quickly.
No Improvement Opportunities
As always, when selling a home you’re naturally going to need to make some repairs, regardless of how minor. Even if a home requires repair, simple adjustments can often be made to attract buyers prepared to pay extra money for said repairs. But when you are working with a We Buy Houses investor, you are giving up your ability to make a profit on your small property enhancements.
Investors Get Human Psychology
For better or worse, investors understand that the reason you’re selling. Home sellers in distressed situations are often called “motivated sellers”. This is because sellers that have a property that they need to sell quickly are motivated to get rid of it ASAP.
Investors will normally look for these people because they want to offer a solution for a clear problem. Unfortunately, not all investors see this service as helping people, but simply making a profit. Ethical investors will genuinely want to help people in whatever situation they find themselves in, whether distressed or not.
You Might Have Other Options
We Buy Houses companies are not the best option for every seller. You might sincerely need help from one of these off-market investors, but you also might not. The large majority of homes are ready to be sold on the MLS with little to no repair.
Some homeowners however, might not have that luxury. Knowing the difference between needing to sell to an investor and having lots of options is a consideration you need to think hard about.
Are House Buying Companies Scams?
There are absolutely scammers among companies that buy houses. However, in our experience, these people are few and far between. The majority of these companies are reputable. These companies buy homes in order to make a profit, which means they will buy your house for lower than the market value.
This does not automatically mean its a scam. If your goal is to sell your house within 5% of the market value, then you will definitely see these companies that buy houses for cash as scams.
Our advice is to be careful however, because there are some things you need to look out for.
You should always be cautious when working with anyone, including a realtor. Not everyone is out for your best interest. Always ask a lot of questions. And if you don’t understand something, slow the process down and ask questions.
There are going to be some red flags you need to look out for though. Some of these are:
- If they don’t disclose the name of their business or company. This is the most basic thing that any credible investor will do. We personally will always disclose our business name when working with a potential client.
- If they will not give you any proof of the cash payment. In some cases, an investor might be wholesaling the property and might not actually be purchasing it for themselves. If an investor is ever going to buy your property though, you will need to have them write you a check as a “deposit” to ensure they are legitimate. If they cannot profit proof of their ability to purchase the property, back out of the deal before any signatures are exchanged.
- They don’t have an online presence. While this one is not always a red flag, it should always be a concern. Websites are incredibly easy to create and most companies with minor resources will be able to make a website. However, some investors in certain areas of the states, particularly rural, might not be so concerned with creating a website. This is just a red flag to ask more questions.
- If they mention any fees. Your credible investor should not be charging any fees. If they are charging fees, then you need to find a different investor. Mark Buys Houses never charges fees, so that we can best serve our clients. Credible investors do not charge fees for their services.
- If they offer an incredibly high price, then try to renegotiate the contract. There is a common scam in which a scammer will offer to buy your home for 90-95% of the market value. You’re excited and agree. But then a few days before the closing they say they need to renegotiate down to 65% of the sale value due to some bogus reason. If this happens, back out of the deal immediately. Steep price drops a few days from closing is highly unethical and was a premeditated attempt to take advantage of you.
How do I figure out if these “Companies That Buy Houses” are credible?
Thankfully, there are things that you can do to protect yourself from scammers who want to take advantage of your situation. Thankfully, there is only a small minority of scammers that make the majority of investors garner a less-than-desirable reputation. But most companies are very reputable.
The best thing to do is to always ask a lot of questions. You will never go wrong in asking for more information.
Thankfully though, you can look to a lot of companies and see what they are doing well. Reputable, trustworthy companies are always the ones who stand out in good ways.
How To Find A Reputable Local House Buyer
Reputable Local House Buyers will be the one’s who are in business to help people. Mark Buys Houses has been in business to help our local community since 2008.
Finding a reputable home buyer is a simple process that involves some due diligence on your part. You need to check out their website to see what they are doing and who they are. Go to their “About” page and get to know their team.
Then hop over to Facebook to see their social media page. Reputable companies are generally going to have active social media pages and will offer free content for their audience.
Some questions you might want to ask are:
- What services do you offer?
- How are you trying to help people?
- What makes you proud about what you do?
- What is the process going to look like from start to finish?
- Do I get to decide the closing date of my house?
Asking the right questions can be the difference between finding a good company to work with and an inexperienced one.
You’ll always want to look out for those who want to rush you through the process. If a home buyer is telling you that you need to make a decision on selling your home today, then don’t trust them. Be wary of those who want to pressure you into a decision before you’re ready to jump on it.
They don’t have your best interest in mind if they want to pressure you.
Reputable companies are happy to wait while you think about your decision. If an offer is on the table for you, then you will have time to think about it and consider it. Eventually, that offer will expire, but not within something absurd like 24 hours.
Make The Best Decision For You
Ultimately, the decision to sell your home is yours to make. No one can make that decision for you. If you decide you want to sell to a company that buys houses, then using the tips below can help aid your decision-making process.
Tips to Choosing Companies That Buy Houses for Cash
Slow The Process Down
Time is something you will never get back, so no need to waste it. However, when working with a company that you might have never met, its worth it to slow the process down and be careful in your decision making.
Ask Great Questions
When you ask great questions, you’re hopefully going to elicit great answers. If a company fails to give satisfactory answers, that should be a good sign to you that they might be in over their heads trying to buy your house.
Do Your Research
It never hurts to do a little bit of research to find out what kind of a company you’re working with. Look at their website, check out their social media, check out their Google reviews. Do your due diligence.
Do a Google search
Search, “companies that buy houses for cash near me” in Google and see what local investors might be able to help you
What Are The Alternatives To Selling To A “We Buy Houses” Company?
Obviously, not everyone will need to sell to a We Buy Houses Company. There are some clear alternatives to this option. One of these alternatives might be a better option for your situation, so think through the process and the pros and cons of each option before making your decision.
Alternatives to selling to a “We Buy Houses” company:
Listing with a Real Estate Agent
This is the tried and traditional way to sell your house. If your home is in fantastic condition and is located in a great, thriving area, then your best bet is going to be list with a realtor. The clear trade-off here is the payment of fees at closing and the time and stress involved waiting for your house to sell.
Selling For Sale By Owner (FSBO)
Selling FSBO is a great way to avoid the traditional fees accrued by realtors. You get to go at your own pace to sell your property and get to show it on your own schedule. However, you will not have the benefits of marketing and dedication that a realtor would give to you.
Renovate and Flip
You could also renovate your property and invest between $10,000-$30,000 to make an additional profit of $20,000-$50,000 by updating your property with all the modern flare and selling it while the market is demanding those renovations. If you’ve got time and money, this is your best option. The downside is you’re having to wait 6-9 months for renovations and having to find a new place to live in the meantime. Not to mention the stress of dealing with dozens of contractors.
Rent It Out
A great option for some people might be to purchase a new home with a new mortgage and rent out the previous property. AirBnB is a great option for people who are looking to do this. The clear cons of this method is the stress of having to become a landlord with no experience, dealing with renters, vacancy, and a second mortgage to pay.
Sell Using an iBuyer Service
Selling to an iBuyer is also an option and you will get very close to the market value for your home. This is a great option for people not wanting to use a realtor and have a home in near perfect condition. iBuyers do not work with people who need several thousand dollars of repairs on their homes and only offer their services in metropolitan areas.
Is Using A Home-Buying Company Right For You?
All selling situations are unique, so only you can make the best decision for your personal situation. This article was written to provide you answers to your questions to aid you in your journey to sell you home.
Think of your goals for selling your home and what you’re trying to accomplish. Your goals will set you on the path you need to take.
Which do you want: time or money? It will take you around 68 days to sell your house with a realtor, on average. Are you willing to wait that long? If so, and your house is in great condition, then opt for the MLS.
Have you examined your options and compared them with your goals? If you’ve looked at the alternatives we listed for selling your home and are still thinking you need to sell your house to a We Buy Houses company, then fill out our form to get a free consultation to sell your house fast.
Frequently Asked Questions About Companies That Buy Homes For Cash
Who are the best companies that buy your house for cash?
There are a lot of good companies that will pay cash for your house.
The general rule of thumb though is to work with local investors because they are not big companies that are placing a number on you as you move through the process.
If you’re in Alabama, dealing with a local investor team likeMark Buys Houses is going to best serve you. We personally work with each person as just that, a person. Your situation is unique and we tailor our approach according to your needs.
How do I find a company that will pay cash for my home nearby?
Doing a Google Search is a great start to the process! Look at the first page results and see which ones are local investors.
Is We Buy Houses a ripoff?
That depends. If you are looking for 90-95% of market value for your home, then yes. However, if you are needing to sell quickly and are willing to take a slightly lower price, then this is the perfect fit for you.
How much do investors pay for houses?
It varies depending on the investor. But expect somewhere around 60-65% of the market value for an offer on your house.
Do I need to do any repairs when selling my house to a cash real estate investor?
No. This is one of the greatest perks to working with a local real estate investor. You do not need to make any repairs to your property. You sell the property in ‘as-is’ condition.
In conclusion, there are many things to learn about these companies, but at the end of the day its simple. We Buy Houses companies are willing to pay you cash for your property and will do so quickly to best serve your needs.
If you are willing to do your due diligence on these companies, you will probably find that plenty of them, like us, are reputable companies that seek to serve our customers first.
If you’re needing to sell your house fast in Birmingham, AL, look no further.
Sell your house in three easy steps
Consider working with Mark Buys Houses to sell your house fast for cash. Our process is simple.
- Fill out our form
- Have a phone call with us to receive your cash offer
- Accept the offer and move forward with closing
We have worked with countless happy people and done so in ways that best served their needs. If you ever have any questions, we are happy to answer them all and meet your needs in whatever situation you find yourself in.
We are investors that buy houses
We have been helping people in their housing situations since 2008. We Buy Houses for cash regardless of what type of property you have, no matter the condition, no matter the situation. We are here to help.
When you need to sell fast, sell to us.
We handle the repairs. We buy houses “as is.”
We will buy your house in whatever condition its in. We never require any repairs on any property we purchase. You get to sell your house to us in “as-is” condition with no questions asked.
We pay cash. No banks needed!
Forget the process to get a mortgage. We won’t be working with a bank to take out a line of credit, so you won’t need to wait for us to get approved for a mortgage to purchase your property. This means you get your cash a lot quicker.
We can close in as little as 14 days.
Because our systems are simpler, we can close in a little as 14 days. That means you could have the cash you deserve in your pocket ASAP.
You choose the closing date.
We do not pick the closing date for you. You get to tell us when you want to close on your property and we will follow your lead. We will never rush you through the process.