You see the signs driving around town, “We Buy Houses for Cash” or some such variation, on the side of the road, or maybe on the window of a car. Some signs are makeshift others are professionaly done.
There are many ways to make money in real estate, one such method is to actively seek out people in need of cash now who are willing to sell their home for sixty cents on the dollar. The fist thing that comes to mind is who in their right mind would give their house away essentially and what kind of a person would do that to soneone else?
Ah, before you start casting stones lets look into this strategy a little closer to see if there is any validity or merit to it.
Obviously someone is making money otherwise the signs would come and go and that would be the end of it.
Now with every transaction in real estate there are two sides to the deal the buyer and the seller,
Fair market value is determined by what a reasonably informed buyer and a resonably informed seller agree to pay and accept as a selling price. This is influenced by supply & demand as well as access to financing and other factors.
So let’s play this out shall we. Say we take an owner of a house that has had a streak of bad luck and hasn’t been making payments on his mortgage with little hope that things are going to change regarding his ability to start making payments. If he continues to miss mortgage payments he will not only loose his house but his credit will be badly harmed making financing for future deals either impossible or very difficult.
This fellow calls a “we buy houses for cash” buyer and finds out that the buyer will buy the house for what amounts to much less than fair market value but in addition will pay the lender any missed payments so that there are no longer any arrears. By agreeing to sell his place for much lower than market value he saves his credit from being badly harmed by a foreclosure and he is able to walk away with more of the equity, if any, than he most likely would have had the bank foreclosed on him. Don’t forget once the bank gets involved there are lawyer costs, selling fees and more that get paid out before the owner sees anything. Plus the bank is primarily concerned with getting the amount owing not with protecting the owners equity.
Additionally, some of these buyers will place the owner into a rent to own property that is more affordable with the option to purchase the property when things do turn around for the owner now tenant.
So here is my viewpoint on this type of transaction. I think there might be a time and a place for this if and it is a big if, the owner has left things go to the last minute and the bailiff is coming to kick him out the next morning for example. Otherwise the owner is likely much better served by using other means such as a clean sale at fair market value.
If you have been thinking of calling a “We Buy Houses for Cash” number you would do best to seek advice from a lawyer or even a REALTOR® you trust to find out if there are better options available to you. Don’t leave it up to the buyer to determine if this is the best option for you as they obviously have a vested interest in getting your place for less.
I hope this sheds some light on another reason seeking professional advise can save you a lot of time, money and hassle.
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