We’ve all seen the signs that say, “We buy houses for cash!” You might be asking yourself, “Are these offers legitimate? What’s the catch?” The answer is yes, many of these offers are legitimate, but you should still be wary of scams. The catch is you will likely only get a percentage of what your home is worth in one of these cash deals, and you will sign a contract that could relinquish your ability to negotiate.
Cash buyers for homes are often referred to as “opportunity investors.” They plan to “flip” your home, meaning they will pay below market value for your home, make minor repairs, and put it back on the market for a much higher price. People who are looking to sell their home quickly may prefer this quick, hassle-free option for a variety of reasons. Although it may cost more initially to update and list your home with a full-service brokerage, you could get substantially more money out of the deal for your home.
As with any business deal, there are advantages and disadvantages of selling your home to a house-flipping business. To aid in your decision, Better Business Bureau has compiled a list of pros and cons of selling your home to a business advertising “We Buy Houses for Cash”.
- You may save money initially. Hiring a listing agent, staging your home, hiring a professional photographer all cost money and time upfront that you may or may not have.
- Close the deal quickly. It usually takes less than 30 days to sell your home to an opportunity investor; whereas, it can take up to several months to sell with a real estate agent.
- Bypass inspections and appraisals. If you have major repairs that need to be made to your home and you do not have the time or energy to deal with them, this may be a great opportunity for you to make some quick cash.
- They pay below-market value for your home. They will usually offer you 80% or less of your home’s actual market value. If you haven’t paid off the home yet, they may only offer you what’s left on your mortgage.
- They often prey on homeowners they think may be more likely to sell. If they think you might be in a tough financial situation, they will start targeting your home with mail offers and they may even try calling or texting you. These companies target trashed or damaged homes, homes that go in probate or foreclosure and sellers who are divorcing or in bankruptcy.
- The industry is riddled with scams. If you’re asked for an “application fee” or other upfront payment, steer clear. There are several scam businesses who pose as opportunity investors who will take your money and run.
How to avoid house-flipping investor scams:
- Pay attention to suspicious advertising. Be wary of signs and solicitations that only include a phone number and no other details. If a business is legitimate, it will not try to hide information from you. · Do your research. Search for legitimate businesses that pay cash for homes using bbb.org as well as other review sites. Always read complaints and reviews on the business before you sign on the dotted line.
- Never pay an upfront fee. A legitimate quick-sell business will not ask for you to pay any upfront fees.