The legitimate ones--are there are many legitimate ones--work like this: They buy houses at deep discounts. The basic formula is: After Repair Value times 70% minus Repair Costs equals Maximum Allowable Offer. (Or ARV*0.7=MAO) This means they'll determine what the house should sell for in good condition. Then they'll take 70% of that. Then they'll subtract repair costs. That's the maximum they'll offer. And they'll generally start out lower. In areas with really soft or declining prices, they may use a multiplier of 65%, rather than 70%.
For example: A house in a neighborhood that, in good condition, would sell quickly for $500,000. (That is, good comps are probably in the range of $501,000-$510,000.) And let's say the house needs $30,000 in repairs and upgrades--new roof, new carpet, kitchen and bath updates, etc. Plus a bit of landscaping. You begin at $500,000. Take 70% of that, or $350,000. Then subtract the $30,000 repair costs. The maximum they'll offer is $320,000.
And they'll begin lower. How much lower? Among the questions you'll be asked on the phone is: "How much do you owe on the house?" "If I could make you an all-cash offer and close in 10 days, what's the least you'd accept?" And that's followed with "And is that the best you can do?" If you owe more than $320,000, to use our example above, they'll have to try a different strategy. If you answer with anything less than $320,000 to the other two questions, and you owe under $320,000, that's what their offer will be. So if you say, "I owe $285,000, and I just want to get rid of it," they'll begin at $285,000.
Are they legitimate? Can they close in 10 days, or whatever they promise? Yes. I'm a real estate investor and while I don't specialize in this area, I have funding (hard money) lined up that'll let me do exactly that. (I'm not soliciting your business, just explaining how it works.) If I, or anyone else preapproved with a hard money lender, finds a property that meets the criteria outlined above, we can borrow the money. It's horrendously expensive--around 5 points and 16% APR--but the loan is made on the value of the property, not the borrower's creditworthiness. The larger companies have other lines of credit set up, and they have private lenders who'll lend the money for less.
Obviously, for this strategy to work, the seller must have substantial equity in the property. Crystal, if you do, then they'll buy your house for cash quickly. If not, they may propose several other options. If you absolutely, positively need to sell and you have little or no equity, they may propose a short sale. They make an offer on your house--it's still low, in fact lower than the amount of money you owe on it. In that case, your lender needs to approve the sale because the lender is "coming up short." Using the example above, let's say the you owe $500,000. There'd be no money to pay the Realtor's commission, to make the repairs, to pay other sales expenses, etc. There isn't as clear cut a formula for what someone can or should offer you on a short sale. It depends, in part, on the comps. It depends on what a BPO (a broker's price opinion, an estimate of your home's value by a real estate agent) came in at, needed repairs, and the lender. Also, unlike the "We Buy Houses for Cash" all cash route, short sales can take months.
Or they or other investors may propose a "Subject 2." If there's some equity in your house, and if the rental income can cover the mortgage payments, they may ask you to deed the house to them while leaving the mortgage in your own name. That's risky for you; you're trusting that they'll make up any past payments and continue paying the mortgage. But that's one way to "walk away," maybe even with some cash in your pocket.
To briefly address some of other comments: Terrence is right: 70 days on market isn't really that long. Make sure your house is priced as low as possible, and shows as well as possible. Cleaned, staged, etc. And make sure your agent is aggressively marketing it.
I gave Glenn a TD (I don't usually do that, and I seldom explain why when I do), but he just got the whole process totally wrong. He's right, though: Real estate investors are in the business to make a profit. Nothing wrong with that. Most Realtors I know are also in the business to make a profit.
Jonathan's right: You could owe your agent a commission, even if you sell the house on your own. As he suggests, most agents will work with you. But be careful.
Keep in mind the effects various decisions could have on your credit rating. Selling to an investor: No problem. Short sale, big problem. Subject-to: Depends.
One man told me he was checking into the hospital and the nurse started asking him about how he bought homes. She said, "you mean that you will buy my home without even looking at it?" He said, "I will be stealing it from you at such a low price I don't even care what condition it is in!"
He says before the week was up he had bought her house and in another week he had sold it for a huge profit!
They are in this business to make money so I beleive that if you lowered your price to what they think it would sell for within thirty days, you would be able to sell it and put their thousands of dollars of profit in your pocket instead of theirs.
You may or may not be able to sell through some other company, other than your listing broker (check your listing agreement).
We Buy Houses are companies that buy at 50 to 60% of the market value.
You can reduce your house in price to make it very appealing to thousands of buyers - through your local area MLS. The exposure through realtors is HUGE, comparing to just some investor company.
However, you need to talk to your agent about marketing your property better, to give it more exposure through the internet. Ask the agent what you need to improve in the house (stage it f.e.).
Or, maybe your agent is not doing his job - something to check on also.
Hope this helps,
Beachfront Realty, Inc.
Now if you are not upside down and you need to sale your home for whatever reason, then using this service can be very helpful in you getting that quick sale that you are looking for on your home. It's FREE to get an offer so there is no risk or obligation in seeing your options. And if you are able to negotiate a win-win situation then you could sell your home in 7-10 days!
My name is Jeffrey Richman and I am the WeBuyHouses.com guy for Mecklenburg and Union Counties. I don't know Don Tepper, but my former partner Greg Gardner does and we have been doing business together for many years.
Unlike what Terrance McDonald says, we are not all "Bottom Feeders". There are some of us who are truly after a win-win scenario. If the homeowner and the investor are happy, that's a winning situation.
Price is not the only reason a property doesn't sell. What about the fact that the banks are not as liberal with their money making it easy to get loans? If people can't qualify to buy, then sellers can't sell.
There are many ways for investors to "buy" your house, the important thing is "are you comfortable doing business with them? If you are not, then don't. You have nothing to lose by checking out your options.
I welcome you to call me at 704-243-5844 or go to my website at http://www.ImmediateHomeSolutions.com and see if we or another investor can assist you.
I can understand your frustrations having been in the same position as you 2 years ago. First of all 70 days on the market is not a long time in the current market, so you have not been selling for long. There are 3 reasons a house sells, price, location and condition. You need to ask yourself "is my house in a good location?", "is my house in good move-in condition?" then you can answer the third question "is my house priced to sell?". You may answer "no" to more than one of these questions and then you can better determine what the price should be. If your home is listed with a real estate company, then your realtor should have done a market analysis for you and told you what your house is worth and what the average days on the market are in your area. I would consider interviewing realtors - make sure you choose a reputable company and a realtor who knows your market. I would recommend pricing your home as competitively as you can & try to cover all your costs - you will make up for your losses at the other end, when you purchase a home. Good luck
Is your home listed with a Realtor now? If it is listed you should make sure your priced correctly and aggressively; what the condition of home - is there anything that needs to be done to ensure better showings and lastly what type of feedback are you getting from the showings? Maybe you want to give some incentives i.e. Home Warranty, Credit at closing for closing costs, repairs etc. or just adjust the listing price.
If you go the We Buy Houses route you won't get anywhere near what you could sell it in the open market. If you do go that route make sure you get an Attorney (Your Own) before you sign or agree to anything. Be careful!
The second saying I believe in is a real estate one, " There is only one reason a home does not sell............PRICE!!!
Desperate times require for desperate measures....As hard as it is, selling at a loss may be your only way out...Isn't that what these companies are doing anyway and exploiting your situation..Good luck
But don't freak out yet- on the market 70 days is about half the average here- and those 70 days would have been since the first of November or so, and December and January- it its been slooooooow. But the new year has started and I've already seen a large spike in inbound business.
What you need to do NOW is get your price right on your house... if you don't think "you'll get what you are asking" then I have a suggestion, DO NOT ASK IT, lower your price today. A high price will keep buyers from looking at it, or alternatively put it in a higher price bracket where the people who do look, will compare it to much nicer house... wasting your time entirely.
Most sellers skip over that clause in the contract but its in there on the bottom of page 1 and the top of page 2.