The Risky Business Behind We Buy Houses For Cash Real Estate Transactions

The greater Raleigh area has seen new tactics and new technology-based institutional investors entering the residential real estate market in the past year boasting a variety of “We Buy Houses for Cash” options. Several local brokers are “guaranteeing to buy” your home if you list it with them and it doesn’t sell within a certain number of days.

We’ve also seen companies like OpenDoor, Zillow, and Knock.com flooding the internet with promises of “hassle free” transactions, taking the stress out of buying or selling a home. It’s best to be educated about the business model for each in order to make good decisions when selling a home. The price you receive for a cash purchase from an investor who wants to buy low and sell high to make a profit may mean the loss of thousands of dollars to you.

Guaranteed Home Purchase

Real Estate Brokers who “guarantee to buy” your home if they can’t sell it sounds like a great, no-risk option that you shouldn’t let pass you by. If you take a look at the fine print, you might see that there are several built-in price reductions set on a pre-determined schedule so that your home will sell in the timeframe allowed. If it doesn’t sell during that period of time, the listing broker will give you a guaranteed price that is usually much lower than your original asking price. Then they turn around and sell it for a profit which they keep.

Now wouldn’t you rather put that money in your own pocket? This tactic is a marketing gimmick used to get the phone to ring. The safest solution is to find a TOP REAL ESTATE BROKER who works with a firm that has years of market expertise and has a realistic pricing strategy.

Selling Homes For Cash

Business Model

Companies like OpenDoor, Zillow, and Knock.com have entered the real estate scene with different models.

OpenDoor has a business model that is similar to discount car companies. They will purchase you home for at a considerable discount after all their fees. They put money into the home, if needed, for repairs and then re-sell it for a profit. So again, sellers are leaving money on the table as a trade-off for the convenience of not going through the normal process of selling a home.

OpenDoor also only deals in homes from $100,000 to $500,000 that were built after 1960. If you are outside their range, they will not do business with you. Their sweet spot is between $100,000 and $300,000 which is the hottest price range right now and usually brings multiple offers well above asking price.

Knock.com has a different business model. They concentrate on bridging the gap between buying and selling a home. They will buy your new house for you so you can move out of your old house and into your new house. Then they set about making repairs, if necessary, in order to put your old house on the market. Clients do not have to deal with showings and are able to move into the new home right away. Once the old home sells and closes, they arrange a closing on your new home.

Again, the purchase of the old home can be below market value and is sold at or above market value. Knock also charges normal Realtor fees of 3% on each end of the transaction.

Lastly, the internet-based, industry giant Zillow, in addition to facilitating home searches, has started buying houses in a couple of markets. Their business model also involves buying a home at an investor price and reselling it for a profit; in addition, they also make money selling leads.

Soon Zillow will use their enormous consumer reach to offer to pay sellers cash for their homes.  All the millions of people who innocently go online to get a purchase quote will have their information packaged up neatly and sold to real estate agents who are hungry for business. Get ready for more phone calls! That’s Zillow’s biggest money maker – selling leads to real estate agents.

Looking at the bigger picture, as ibuyers enter into the market, these “below market” discounted prices will have an effect on future appraisals. Realtors and appraisers pull their comps from the Multiple Listing Service (MLS). The data collected by MLS on sales of homes will now be corrupted by these discounted sales. This will, in turn, affect appreciation rates and future pricing of home for sale.

A better way to reduce the stress and hassle of selling a home is to find an experienced real estate broker that will work hard to make your client experience a great one and eliminate the stress without eliminating your profit. We have a fiduciary responsibility to our clients. Investors looking to buy your home for cash do not. Who’s going to have your best interest at heart?

With home values going up fast and technology making it easier to reach the masses, it’s no wonder institutional investors are leveraging this opportunity to make money.  It is a golden time for investors if they can find someone willing to sell their house at a discount.

As a savvy homeowner, your best option is to give us a call to do a market analysis on your home to show you what you can put in your pocket. Houses in the price range these cash investors want to buy will sell above market value in a few days if you take advantage of our one-on-one, proven techniques. Our Team uses aggressive marketing tactics and we’re always looking out for YOU!

Linda Craft & Team Realtors have been the experts in Real Estate for over 33 years. Our Team has survived the savings and loan crisis, .com bust, and the great recession, and is surviving this current housing shortage. Our Team believes there is opportunity in every crisis and can help you navigate through this current housing shortage with as little stress as possible. Give us a call at 919-235-0007 or online at lindacraft.com.

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