Traditional ways to sell a house include preparing the property, listing it for sale with a real estate agent, and hoping bidders compete for a winning offer – ideally resulting in monetary gain for you.
If the traditional method does not appeal to you or circumstances make it impossible, there are alternatives that allow you to sell your home. In many situations, it means selling your property to a business.
While they all appear to be the same on the surface, there are many distinct varieties of businesses that are interested in purchasing your home, frequently for cash and with a fast response time. We’ll go through the various kinds of businesses you may come across and how they operate, as well as what to consider if you’re thinking about selling your house to a company that buys houses.
Types of Companies That Buy Houses
The businesses that purchase your house from you are numerous, and they have diverse techniques of acquiring houses as well as distinct purposes. The following are six types of firms that might buy your home:
- Franchise cash buyers.
- House flippers.
- Buy-and-hold investors.
- Trade-in companies.
- Lenders or brokers freeing up cash to encourage purchases.
Franchise Cash Home Buyers
There are a few well-known national firms that buy houses for cash and operate as franchises. This means the individual you’re dealing with would be a local franchisee, bringing the benefit of local knowledge.We Buy Ugly Houses, HomeVestors of America Inc., We Buy Houses, and I Buy Houses are three of the most well-known names. Other names to remember include We Buy Ugly Houses, HomeVestors of America Inc. (which is also the parent company of We Buy Ugly Houses), and We Buy Houses.
“Our primary objective is to buy houses that we either restore and sell or keep as rental properties,” says HomeVestors CEO David Hicks. He adds that, as the name We Buy Ugly Houses implies, the emphasis is on purchasing a house in need of little to no renovation and paying for it based on its current state.
“We’re purchasing directly from homeowners, and it’s usually been triggered by an event: they want to sell in order to be closer to their children (for example), … and we acquire a lot of inherited houses. A parent’s home that has now been passed down to the kids but is located in Atlanta and they reside in D.C., and what should you do with that property?” Hicks explains.
Many homebuyers take the cash option; in this case, it’s usually a local contractor who will flip a property or keep it for rental income. The franchisees will then pay either a regular fee or part of profits to the bigger firm for brand recognition and further help as required.
In recent years, a new kind of firm known as iBuyers has emerged, which seeks to buy houses for cash quickly. Companies like Offerpad, Offendoor, RedfinNow, and Zillow Offers are examples of well-known companies that fall under the iBuyer umbrella.
These firms, which operate in a number of areas across the United States, buy houses that need little to no repair in order to put up for sale quickly and profitably. A house seller may expect a greater payout than a cash home buyer would pay for houses that require more work, but an iBuyer is involved in more transactions altogether since it acts as a single firm located across numerous markets.
While iBuyers may appear on the news frequently, they make up a very minor portion of the overall housing market. According to Redfin, a national real estate brokerage and parent company to its own iBuyer platform, RedfinNow, just 0.3% of properties sold in the fourth quarter of 2020 were purchased by any of the four major national iBuyer firms.
You’re probably familiar with the phrase “flipping a house,” which refers to buying a property that is old or in need of repair, and then remodeling it to make it move-in ready before selling it for (hopefully) more money than you paid for both the property and the renovations.
House flipping is a common technique for property investors to reduce expenses. Typically, house flippers aim to flip a home in six months or a year to minimize operational and holding costs. While cash buyer franchisees may flip houses, there are many independent local firms who most likely have the capacity to make a transaction happen fast by providing cash to a homeowner.
Individual homeowners with some contracting knowledge may also sell houses and renovate them, but their cash reserves to buy and remodel without borrowing is less likely to be found unless they have investors supporting them.
Another sort of investor you’re likely to encounter is one who will acquire your house and rent it out to renters. In many situations, the investor seeks to purchase a property that needs some renovation before being leased.
Individual rental home owners are the majority of buy-and-hold investors, with only about 23% belonging to individuals who own between one and several properties in order to make money. According to the 2018 Rental Housing Finance Survey conducted by the US Census Bureau, results of which were first published in 2020, nearly 73 percent of all rental houses in the United States are owned by people who own between one and a few properties for profit. Cash offers are certainly feasible, yet investors may also finance the deal, which might extend the closing time compared to a personal or business cash offer.
If you’re looking for a quick sale to free up money to buy a new house while you’re unwilling or unable to give up much of the property’s value in the accepted price, a trade-in firm may be the solution. These lenders finance the purchase of a new property based on the current house’s value, then sell the existing home and keep a percentage of the proceeds.
Knock and Orchard are two trade-in firms sometimes dubbed iBuyers because of their platform, which aids homeowners in freeing up cash to buy a new house. We’ve separated them into this category since they specialize on the first home sold on the open market.
Lenders or Brokers Freeing Up Cash to Encourage Purchases
In certain circumstances, the firms offering a trade-in option are lenders or real estate agents who buy a client’s current house so that the customer may make a more competitive offer on another property.
The Raveis Purchase program is offered by one lender, William Raveis Mortgage. After the borrower’s existing house has been purchased by the lender, it becomes the responsibility of the borrower to sell it. In a seller’s market, borrowers now have the option to act as cash buyers for a new property, which is particularly useful.
A trade-in service can take the worry out of selling a house on the open market before finding a new home, but then having to move fast in order to secure housing. “You simply don’t have enough time to complete a deal,” says Melissa Cohn, executive mortgage banker for William Raveis Mortgage on the East Coast.
Many lenders and brokers that provide these kinds of programs see them as a way to encourage individuals to engage in active home purchases and sales. The broker will benefit from being a part of two transactions, and the lender is frequently going to give the homeowner their next mortgage.
Should You Sell Your Home to a Company That Buys Houses?
The decision to sell your house to a firm is a personal one, since circumstances differ greatly.
A cash home buyer – whether a franchise or an independent investment firm – may be the ideal choice if you need to sell your home quickly but don’t want to make any updates or improvements. If you want to sell your home quickly, but still prefer the idea of a guaranteed fast sale, an iBuyer may be the way to go. A trade-in firm, lender, or broker who provides a trade-in service might be the solution if you need cash to make yourself more competitive with other purchasers when selling your current house.
It’s also vital to think about the present housing market. In many parts of the United States, there are few houses for sale and a lot of need from purchasers, which means many homes sell fast and above asking price. Consider consulting with a real estate agent about your potential success on the market while also talking to firms that might buy your home if you’re on the fence.
Sell Your House for Cash Today
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