Last week I was driving down a Los Angeles freeway and saw a sign. It really caught my attention this time. When you see a sign along the lines of “We buy houses”, that means that it is advertising for a group of investors that will offer to buy your house as is, for cash. They are looking for people who want to get out from under a house fairly quickly, so they can move on with their lives. Usually, the seller is in a position where they more or less have to get rid of the house because of financial reasons.
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The buyer is going to offer less than the house would be “worth” on the open market, simply because of the desperate situation the seller is in. The seller is probably behind on mortgage payments and is about to lose the house, and doesn’t want to get into that tangled mess of foreclosure or short sale proceedings. As we all know the we buy houses in L.A. market is a direct hit or super miss. Or, it could be an estate situation that needs to be taken care of.
With most of the investors, the condition of the house doesn’t matter. If it is structurally sound, the investor is counting on fixing the house up anyway, so that is another reason for the discounted sales price. Once agreement is made between the buyer and the seller is concluded, the closing can take place in a matter of a few days, and the seller can have the cash for the house very quickly. There is very little money involved in closing costs or fees, and the result is a heads up, very transparent cash transaction.
There are some investors who will buy houses for cash who will come closer to the buyer’s asking price, if the home is in good shape from a physical standpoint. The investor may be in the market to rent the house, and may be in a position to buy the house for a higher price outright for that reason, since he will have little to no outflow of cash for rehabilitation of the house. For example lets say I bought a property 10 years ago for $200,000 and I now owe only $100,000 then I would have $100K in approximate equity. If I need to sell my house because I’m getting a divorce and my soon to be ex wife wants $50K. Instead of listing the house and waiting months of sometimes even a year or longer and paying mortgage and having to deal with an intolerable ex or maybe some other situation I can just go to an investor and they will buy me out quick. I loose equity buy get the sale done really fast. And as they say time is money and in some cases time may be worth much more, even beyond priceless. This is when the circumstance deems it necessary.
Some would say that people are being taken advantage of by predators buying these houses for less than they are worth, but the people would have to continue to make house payments, pay taxes and would still lose their houses anyway to foreclosure or other means. And cash… well cash IS king. Most people realize what they are doing when they sell a house for cash, and if they have any questions, they should seek advice from relatives or get legal advice. These people realize that equity is not always worth taking a gamble and that the alternative path that may cost in terms of equity but lead to some reduced risk, either real or perceived risk.
Many homeowners who see a “We buy houses” sign have another place to live, but they just need to get out from under their current house in order to make that move. Many of them have already had their house on the market for some time and they have received very little, or no traction at all from that source. In some cases, the houses are in such bad shape, that they are in no condition to be on the regular real estate market at all.
The “we buy houses” market fills a niche market in the real estate industry that serves a need. If there were no need for this type of sale, then there would be no buyers and sellers engaging in transactions in this manner. The moving of real estate property is a dynamic relationship between people from all walks of life, and when there is a need, there will be ways to fulfill that need.