What You Need to Know About Those Companies That Buy Houses
A variety of companies and investors will pay cash fast for your home – is it the right choice for you?.
When you’re ready to sell your home, the traditional method is to prepare the house, list it for sale with a real estate agent and hope buyers will compete for a winning bid – ideally ending in monetary profit for you.
Type of Companies That Buy Houses
The companies that will buy your house from you are varied, and they have different methods of purchasing properties, as well as different motivations. Here are six types of companies that could buy your house.
Franchise cash buyers.
Lenders or brokers freeing up cash to encourage purchases.
Franchise Cash Buyers
There are a handful of national brands you may recognize that purchase homes for cash which operate as franchises. That means the individual you’re working with would be a local franchisee, adding the benefit of local expertise. Some names you may recognize most are We Buy Ugly Houses, HomeVestors of America Inc. (which is also the parent company of We Buy Ugly Houses), WeBuyHouses.com and Joe Homebuyer.
“Our typical focus is buying houses that we either fix up and sell, or we keep as rental properties,” says HomeVestors CEO David Hicks. He notes that, as the We Buy Ugly Houses name illustrates, the focus is on purchasing a home as-is and paying for it based on its current condition, especially if that means it needs some work.
Reviews and reports across a variety of franchise buyers note that offers in this type of situation tend to be low, often 50% to 70% of market value, in exchange for a fast deal and cash payment.
“Our business is very stable and consistent, because we’re buying the older houses that need significant repair,” says Hicks, noting that many homeowners selling to HomeVestors or We Buy Ugly Houses know their house needs significant updates in order to be on par with other homes in the neighborhood, but they don’t have the resources to do it themselves – be that time or money.
Franchisee cash buyers will typically opt to work with local contractors to flip a property or to keep it for rental income. The franchisees will then either pay a regular fee or portion of profits to the larger company, depending on the company, for the brand affiliation and additional help as needed.
In the last few years, companies known as iBuyers have become a more vocally present type of company offering to purchase homes for cash quickly, with a major focus being on the technology used to help valuate a property and complete the transaction. Opendoor and Offerpad are the two most recognizable names currently operating in this category.
These companies, which operate in a growing number of markets across the U.S., purchase homes that need very little work to be ready for the market, with the goal of turning around and selling it quickly for a higher price. The amount paid to the home seller tends to be higher than a cash buyer would pay for houses that need more work, but an iBuyer is involved in more transactions total by operating as a single company located across many markets.
“In an up or down market, people still need to move and we’re focused on providing a seamless home buying and selling experience when it’s right for them,” wrote Kerry Melcher, head of real estate for Opendoor, in an email. “People come to Opendoor from all walks of life, whether they’re downsizing for retirement, moving for a job, or they’ve outgrown their current home – but what they all have in common is the desire for a simpler and more certain real estate experience.”
The changing housing market has proven tough for iBuyers, with both Zillow and Redfin opting to close their iBuyer operations within the last two years. More recently, both Opendoor and Offerpad have reported major earnings losses – $399 million in net revenue losses for Opendoor in the fourth quarter of 2022, and $121.1 million in net revenue losses for Offerpad during the same time period.
While that may not be encouraging for investors, it doesn’t necessarily impact homeowners interested in exploring the alternative methods of selling a house. Both Offerpad and Opendoor have scaled down the size of their operations, while also exploring other options that may resonate with the homebuying-and-selling public.
Opendoor, for example, has programs that partner with homebuilders to streamline the sale process of a new construction home, make it easier to have a real estate agent take part in the sale process, a listing option to receive both an offer and the opportunity to test out the market and a marketplace where people can buy and sell homes directly as an alternative to the traditional real estate model.
“With 99% of real estate transactions still happening offline, we view the traditional real estate transaction process as our competitor,” Melcher says. “The traditional real estate process is time consuming and complex; consumers deserve a modern, e-commerce experience that suits their needs and timelines.”
If you’re familiar with shows on HGTV, you’re probably familiar with the concept of flipping a house: Investors purchase a property that is outdated or run-down, and renovate the property to make it move-in ready, ultimately selling it for (hopefully) more than the cost to purchase and remodel the property. Rocket Mortgage notes many successful house flippers operate on a 70% rule, meaning they will determine their maximum offer price as 70% of the estimated after-renovation value of the home, minus the cost of repairs.
House flippers commonly aim to flip a house within six months or a year to cut down on operating and holding expenses. While cash buyer franchisees may flip houses, there are also many independent local companies that likely have the ability to make a deal happen fast by offering cash to a homeowner.
Many individual homeowners with some contracting experience will flip houses as well, but their cash reserves to make a purchase and renovation without financing is something you’re less likely to come across, unless they have investors backing them up.
Related: When Will Housing Prices Drop?
Another type of investor you’re likely to come across is one who will purchase your property and keep it to rent out to tenants. In many cases, the investor aims to buy a house that requires some work to avoid paying top-dollar, and will renovate before leasing it.
Franchise cash buyers and real estate investment companies may be buy-and-hold investors, but nearly 70% of rental properties consisting of between one and four units across the U.S. are owned by individuals who own between one or a few properties to bring in income, according to the U.S. Census Bureau and U.S. Department of Housing and Urban Development’s 2021 Rental Housing Finance Survey, the results of which were first published in late 2022. Like with house flippers, cash offers are certainly possible, but investors may also finance the deal, which could make the closing time longer than with an individual or company offering cash.
The Ashley Marie Collection – Natural Hair Care for Gen Z by Gen Z
As a new generation of beauty consumers emerges, the beauty industry is undergoing a significant transformation. Gen Z consumers, in particular, are highly conscious about the ingredients in their beauty products. With a population that accounts for almost 30% of the world, Gen Z (born roughly between 1996 and 2012) are a major focus for several brands.
The desire to be environmentally and socially aware, has led to a change in this generation’s values and spearheaded the movement, urging companies to take action on the climate crisis. This is not merely rhetoric. Based on a survey conducted by Capgemini, in 2021, approximately 69 percent of surveyed participants belonging to Generation Z stated that they were willing to spend more on health and beauty products that contain natural and clean ingredients.This trend has led to the rise of natural beauty products, and the Ashley Marie Collection is at the forefront of this movement.
Created by 17-year-old entrepreneur Ashley Marie Gibson, the Ashley Marie Collection features a range of natural hair care products that cater specifically to the evolving needs of Gen Z consumers. Don’t be fooled by her young age – Ashley is a total boss. As a Gen-Z entrepreneur, Ashley is passionate about creating products that use natural ingredients and prioritize health and well-being. The Ashley Marie Collection reflects Gen Z’s preference for natural and eco-friendly products with its commitment to using only the cleanest, ethically sourced ingredients. All products are cruelty-free, color-safe, paraben-free, sulfate-free, and formulated with natural ingredients.
If being clean wasn’t enough, this brand checks off another box – being diverse and inclusive! The Ashley Marie Collection is an entire hair care line specifically for 4C hair, a hair type that is often overlooked in the beauty industry. The line features a range of uniquely formulated products, including a Clarifying Shampoo, Moisturizing Shampoo, Hydrating Conditioner, Protein Conditioner, Leave-in Conditioner, Coil Cream, and Curly Coil Styling Gel. All of which work wonders for kinky, thick coils and will leave strands feeling and looking even better!
It’s your last day to apply to speak at TC Disrupt
Today’s your last chance to apply to speak at TechCrunch 2023
Why should you drop everything to get that application in by 11:59 p.m. PDT today? Not only will you help inform and educate the next generation of startups — and potential unicorns — but you’ll also establish or enhance your reputation as a valued thought leader and partner. Around here we call that a win-win situation.
How to apply to speak at TechCrunch Disrupt 2023
When you apply, you’ll choose one of the two formats below and submit a title and description of your topic:
Breakout Session: Up to two people (including moderator) lead a 30-minute presentation followed by a 20-minute Q&A from an audience of up to 100 attendees. You’ll be able to display a presentation and have limited AV capabilities. You’ll present one breakout during Disrupt.
Roundtable Discussion: One person leads a 30-minute interactive conversation for an audience of up to 25 attendees. There is no presentation or AV — it’s all about organic conversation. You may potentially repeat this roundtable twice during Disrupt.
TechCrunch vets every application and then selects the finalists who will participate in the Audience Choice voting round. We’ll post the topics, descriptions and speakers online, and then TechCrunch readers will vote for the sessions they would like to see at the event. The top vote-getters will present live at Disrupt.
These are the important dates you need to know:
Application deadline: Today, April 21, by 11:59 p.m. PDT
Finalists notified: April 27
Audience Choice voting: May 1–12
Winners notified: May 15
Once more — a little louder this time: It’s your last opportunity to submit your application to speak at TechCrunch Disrupt on September 19–21! The application window slams shut today, April 21, at 11:59 p.m. PDT. One more reminder: Save up to $825 with an early-bird ticket. Buy your Disrupt pass, and join us in San Francisco!
TechCrunch+ roundup: Deep tech tips for SaaS VCs, toxic fundraising, student visa startup options
If someone said “startup” while we were playing a word association game, I’d respond with “fundraising.” (I bet you would, too.)
Asking people for money is a key aspect of every founder’s journey, but Techstars Managing Director Collin Wallace says it can also “accelerate your demise.”
For example, raising a round to rev up engineering, sales and marketing sounds positive — but what if the business itself has negative unit economics?.
“Most of the time, what stands between a company and its ability to achieve scale is not a lack of money,” writes Wallace in TC+.
“It’s better to ask: Do we have hustle problems? Product problems? Process problems? People problems? Is my business model fundamentally flawed?”
In this article, he examines four scenarios that often lead entrepreneurs to seek out new cash and explains why getting “a clear picture of what is fueling losses” is much more important.
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