What Happens When Companies Buy Houses?

Written by Ashley Sutphin Posted On Wednesday, 23 June 2021 00:00

If you’ve ever seen signs for companies that say they buy houses, or maybe you’ve been approached by one, you might find yourself wondering exactly what it is that they do.

There are a couple of different types of companies that buy houses cash. There are those ones that you see advertising in your community, but there are also tech-driven companies that do it.

How Do Home Buying Companies Work?

If you want to sell your house, you typically will hire a real estate agent, and then they’ll place it on the MLS. If you want to sell it fast without doing work or paying a commission, then you might instead try to sell it as-is.

There are companies that buy houses as they currently are for cash. This can mean local cash buyers, investor networks, or iBuyers.

• A local cash buyer is typically just someone who will buy your house and either flip it or turn it into a rental.
• An investor network is one of those companies that you see advertising most often, and they’re local franchises. They don’t pay much for houses because they usually focus on ones that are in pretty bad shape, and then then they flip them.
• Then, there’s the term iBuyer. The term stands for instant buyer. These are companies that use algorithms and data in the form of what are called automated valuation models to determine what your home’s worth. Then, based on their data, they’ll make an offer.

What Are the Benefits for You?

If you want to sell your home quickly, one of the three above cash buyer options can be good.

The vast majority will buy your house just like it currently is, so you don’t have to make repairs or updates, nor do you have to worry about staging it.

They’ll usually be flexible in helping you find financing solutions, and you’re probably going to get a relatively fast closing. These companies don’t have to go through the traditional financing process from a bank, so they might be able to close in seven to 14 days.

You’re also avoiding real estate commissions and closing costs.

Are There Downsides?

While selling your home quickly and easily to a company can seem great, there are certainly some downsides you have to be aware of.

First, there’s a pretty high likelihood you’re not going to get full market value. You’re trading that for simplicity and lower costs.

There’s also always a risk of predatory tactics or even scams.

If a company is trying to pressure you into selling your home for far less than it’s worth, that’s a problem.

There are a lot of legitimate companies that do buy houses for cash, but not all of them are completely legit. You have to do some research if you’re thinking about having a company buy your house to make sure it’s not a scam.  

How Does the Process Work?

If you’re interested in the direct-buying model, which is ultimately what all the examples above are considered, then you might wonder what the process looks like.

Companies might vary slightly in how they do things, but typically, the home buying company might come to you, or you could approach them. The buyer or company will get some general information, and then they’ll schedule a walk-through.

The buyer will determine the market value of the home once any updates or repairs are made. At that point, they’ll present the seller with an offer, which will include the price they’re willing to pay, a closing date, and terms of the sale.

There are negotiations, and then once everyone accepts the offer, a closing date is set.

When it comes to direct buyers you just have to think about what your priorities are and how those weigh against the potential downsides. If your biggest goal is to move quickly and avoid having two mortgages, a home buying company can be a good option if they’re reputable.

If you’re in no rush and you want the highest price for your home, then you might go the traditional route in selling it.

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