You have probably seen the yellow signs on the side of the road, “We Buy Houses” or “We Will Buy Your Home For Cash.”
It makes sense that in a housing market with low inventory someone would be looking for homes, right? It may even seem that they are speaking directly to you depending on your situation. Most people believe the unassuming yellow signs are handwritten by a real estate investor looking to buy.
That’s precisely their purpose – to engage and sell. The signs are purposefully designed to appear unprofessional and appeal to your sense of curiosity. But buyer beware, there’s a catch, and it could cost you.
Meet Phil & His Son
Phil is 82 years old and is on a fixed income. He has recently lost his wife after a long battle with cancer. He moves in with his son, and need to sell the family home. They don’t have the funds for repairs, and medical bills and expenses continue to pile up. It’s stressful and taking a toll.
The Solution Magically Appears
On his way to work, Phil’s son spots a “We Buy Homes” sign on the side of the road and thinks, ” I need to get this house off my shoulders, I want it done.”
He calls the number.
The person on the other end of the phone offers him $200,000 – luring him with promises of no realtor fees, selling the house within 30 days, and no repairs necessary. Problem solved, right? Everybody wins. Well, yes and no.
While Phil’s son has the option to sell the house quickly, $200,000 is well below the market value – 70% or more to be exact! The person on the other end of the line could be a wholesaler, investor or real estate agent/broker and mostly concerned about making a profit, despite Phil’s situation. Let’s talk about how this situation works in the real estate world.
The Wholesale and Investor Breakdown
The wholesaler offers a contract on Phil’s house for $200,000. Repairs and upgrades are estimated at around $30,000. Once completed, the house will sell for approximately $340,000. With that in mind, the wholesaler reaches out to a network of investors and sells the house for $250,000. He or she has now made $50,000 without ever owning the home. In fact, wholesaler contracts commonly add a contingency that allows the wholesaler to back out of the deal if he or she is unable to find a buyer before the closing date – limiting the risk to the wholesaler. It’s a legit business, but it’s not about customer service or the well-being of clients. It’s purely about the sale – and not for the benefit of the homeowner. The situation is very similar to an Investor making the offer. However, the end game would result in the investor owning the home rather than immediately selling. In both situations, the wholesaler and investor will not pay market price.
The Real Estate Agent & Broker Angle
There is a common phrase in the sales industry and specifically in the Real Estate sales industry – “it’s a numbers game.” Which means you need to focus on creating opportunities rather than fixate on the positive or often negative outcome of a single exchange. To do this, real estate agent and brokers need to create systems that produce “leads” or sales opportunities. There are thousands of lead generation methods from billboards and postcard mailers to you guessed it, posting yellow signs around town and positioning yourself as a “real estate investor.” As shameful as the truth is, it is common for real estate agents and brokers to pose as investors. Furthermore, they offer you a ridiculously low offer on your home, knowing full well that you will not accept that offer, only to then switch the conversation to say, “Well, if you don’t want to accept my ‘investor offer,’ I can get you a ‘market value’ offer if you list your home with me.” This practice has been frowned upon in the industry for years, yet it still continues.
Moral of the Story
While Phil’s situation may be frantic, it isn’t the case of everyone that uses a wholesaler. The moral of the story is to be aware and don’t let the stress of a situation dictate your decision making. Often wholesalers, investors and even some real estate agents don’t have your best interest at heart and will not give you the personal service and guidance a real estate professional can provide.
For more on this topic, check out this article from The Balance.com – http://bit.ly/2Gaut8t.
We Are Here to Help
If you are in a situation that requires the sale of a house or property, please contact us. Toner Real Estate Solutions provides personalized service to those who wish to buy or sell a home or commercial property throughout Tacoma, Pierce County, and the surrounding areas. We will customize our approach based on your situation.
Other client services include:
Private Lending – Real Estate Based & Business Focused
Private lending is for those hard-working individuals who need a unique form of funding for their business when the conventional route isn’t an option. We work directly, investors to borrowers, no brokering loans or applications. This streamlined approach gives us the ability to make prompt, case-by-case decisions and to make funding decisions quickly.
Developing – Raw Land & “Ground Up”
Do you have a property that you’re just not sure what to do with? Or maybe you have a house in a great location, but want to maximize its value? We can help. By utilizing our services, you may be surprised to learn about the financial growth and opportunities that come about once we evaluate a property. Let’s talk about how this can benefit you and your situation.
Now that you know a little bit more about Toner Real Estate Solutions, please let us know how we can help you. Even if you’re not sure which service fits your needs, it’s worth a conversation. We are here to help. Let’s chat!
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Copyright 2018 Joe Toner, Toner Real Estate Solutions, Tacoma, WA.
Toner Real Estate Solutions specializes in private loans, Private lending, real estate, development, and buying and selling homes throughout Tacoma, Pierce County, and surrounding areas.
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