You've probably seen a disproportionate number of signs and advertisements touting the interest of investors in purchasing houses quickly and at attractive prices. The question is whether selling your home will allow you to obtain the best possible price for it.
As high prices are involved in selling a house, it is a highly sensitive transaction in which the loss and profit margins are typically very significant. Getting a good deal or a bad deal is up to the individual, but ultimately, one of the parties walks away happy.
To answer the question of how much do we buy houses pay, let's first know who they are, or if you think your house is a little untidy and you want to make a quick sale, check out a blog post on We Buy Ugly Houses.
Who are "We buy Houses?"
We buy houses is a company-based platform that allows people to get the best deals when selling their homes without going through the hassle of using traditional methods such as hiring a realtor.
Due to this, whether or not they are legitimate and offering good deals is called into question. The agents operate under a profit-based system that is primarily concerned with business.
They purchase your home with the intent of reselling it for a profit in the future. They can do this in one of two ways.
- Selling it to a realtor who will then flip and fix it.
- Fix and flip the house for a profit.
- Fix and rent the house.
So, what is house flipping and fixing?
House flipping and fixing
A profit-making process involves purchasing a house, renovating it, and then reselling it at a higher price.
Most of the time, the agent aims to make a profit of 15% of what they paid for the house. In other words, they could buy your home for more or less than 60–70% of its market value after repairs.
At this point, the notions of scamming begin to creep into the mind. The fact that they increase the value of your home before selling it does not necessarily imply that they are con artists.
Without any project costs, you can expect to receive approximately 70% of your home's sold value in a cash offer, which is a good deal when considering all of the processes involved in traditional house selling methods.
How Much Do We Buy Houses Pay: Pricing System
There are a few pros and cons to getting cash for your house. You're probably wondering who would want to risk getting a bad deal on their house, but you'd be surprised at how many situations out there lead to this.
For example, landlords may want to get rid of their property due to maintaining tenants and late rent payments.
|Reasons for selling a house quickly|
|Moving Area||People moving to a different country or state may want to sell their houses quickly|
|Inheritance||Inherited property that someone has no use for, and the cash would be better for them.|
|Bad Inspections||Inspectors may have flagged the house's poor conditions. It's less expensive to sell the house than to repair the extensive list of issues. Maintaining it is time- and money-consuming if the owner doesn't even live in the house.|
|Divorce||Divorced couples who want to move on and go separate ways may opt for a quick sale.|
|Downsizing||Downsizing parents who need to move to a smaller house and have no need for their larger home.|
|Previous House Flippers||Other house flippers that have been overwhelmed by renovating the house may sell it as it is.|
|Distressed Homeowners||A homeowner whose house has failed to sell or has sat on the market for too long may opt for a fast cash sale.|
The table above gives an insight into the type of person or situation where people want to sell their houses for quick cash. Therefore, it is vital to get the best deal for your property.
The best deal you can get for your house depends on a few things or criteria.
How the cash offer is made
Everyone's home is different in terms of value, size, and location, and the agents will use a method to determine the cash offer for your home based on these differences.
If you watch television, you've probably seen shows where people buy a house and transform it into their dream home. This process is not as simple as they portray it, and several factors must be considered.
|Factors to be considered:|
|✔️The current condition of the house|
|✔️The holding costs of the house|
|✔️The renovation cost of the house|
|✔️The expected final price of the house|
|✔️Real estate commissions|
The buyers must also consider the local housing market and the characteristics that everyone is looking for. For example, a porch in hot summer climates or house insulation in cold climates are both excellent ideas.
This is done to get the house sold quickly after being flipped and renovated. These factors, amongst other considerations, are taken into account by the buyer when determining the final selling price of your home.
How Much Do We Buy Houses Pay: The final cash offer
After all the renovations, the final cost of the house includes all the project costs plus the profit. This means that the money you get offered for your house can be calculated by:
Buying Price= The final cost – project cost - profit
This is commonly known as the After Repair Value (ARV), and it's the offer for your house once renovations and repairs are completed. The buyers have to know and understand the local market value to determine this value. This will then help determine the ARV.
These are the expenses put into the house from the moment it's bought to the moment it's sold.
This is the amount of money required for home renovations. It is possible to renovate a property in stages or overhaul it completely.
When only a portion of a house is renovated, this is referred to as a "partial renovation." Take, for instance, the kitchen.
The term "total renovation" refers to the renovation of the entire house. The renovations include the cost of the house's exterior, such as the hedges and lawn.
The agents may have prior experience in house flipping and will only provide an estimate after visiting the property. Following the renovation process, this is done per the house's size and design.
On average, renovating a house costs $15–$60 per square foot, depending on the materials.
They consist of the costs incurred during the renovation process, including taxes, insurance for the home, utilities, local building permits, and maintenance fees.
Keep in mind that even after a renovation, activities such as open houses and house tours can be costly.
The agent's commission is deducted from the proceeds of the sale.
If the house does not sell, the holding fees begin to eat into the profit, which is bad for the realtor because overpricing to make up for the loss will only keep the house on the market longer than it should.
This may eventually result in the realtor suffering a financial loss or going bankrupt, which causes them to become desperate to sell the property to other "we buy houses" companies, and the cycle continues.
The realtor aims to maximize profit, and for desperate sellers, a deal may seem too good to pass up. When the deal is too good, it's advisable to take time to think about it.
If you are gullible, the agents may profit up to 30% of the renovated house value. Most deals have a profit for the agent of about 10%-15% of the ARV.
These online-based house buyers typically buy homes ranging from $100,000 to $600,000. They use an algorithm that determines the home price after the seller fills out an application.
They buy houses that are in good condition and charge about 5% of the home's total value as a service fee.
How Do Ibuyers Work?
After completing this application form, the homeowners receive a cash offer for their home.
A virtual or physical house inspection is conducted after the owner has agreed to the cash offer, during which the price may be reduced, or the owner may be charged for any repair fees. The owners can then complete the transaction or vacate the premises within the specified time frames.
That is all.
So, should I sell my house through We Buy Houses?
First and foremost, it's essential to understand how much we buy houses pay and exactly how they work. That way, you'll figure out whether it's advisable to go through with we buy houses or whether traditional methods like real estate agencies are better for you.
We have created a table overview picking out the pros and cons of using we buy houses to get you started.
|Should I Use We Buy Houses?|
- You will receive a quick cash offer and have a shorter waiting period than traditional methods. This is because there are fewer contracts and banking transactions involved.
- The final payment you receive for your house is less than the value you would receive if you sold it using traditional methods.
- It is convenient for people who want to sell their homes quickly without waiting for the standard market to warm up to their property. The owner can also sell their property without doing a lot of cleaning or remodeling.
- Agents are motivated by making the most money possible, and there is also a risk of being taken advantage of. There is also less paperwork involved, which can create more risks.
- It carries fewer liabilities, such as the possibility of losing one's home. You will probably need to apply for "fix and flip" loans if you sell the house independently. These loans will most likely use your home as a liability.
- The general advantage is a quick sale, whereas the disadvantage is a low offer on your home in the long run.
How do I get the best deal for my house?
Using the formulas that buyers commonly use to calculate their working estimates makes it possible to get a general idea of how much profit you will make after selling your renovated house. Most importantly, you should stay a step ahead of the game.
You can figure out how much they will cost by calculating the renovation costs and any additional fees that may be required. Use a similar house in the local market to determine the after-renovation value, after which you subtract the agent's fees from it.
It is customary for agents to charge 10% to 20% of the after-renovation value, the sum of their anticipated profit plus the renovation expenses. When you subtract this value from the after-renovation value you used, you get the estimate your real estate agent will most likely give you for your home.
The typical value you will receive is approximately 70% of the property's value after renovation. If it is less than this, you can negotiate with them to increase their offer to this amount, or even more, depending on your negotiation skills, to get the best price for your home.
This strategy aims to overvalue your home by adding additional markup to the yearned price. So that even while they are taking their commissions, you still have the amount you had anticipated.
ARV × 70% -project costs= estimated price offer