We Buy Ugly Houses vs. Local Home Investors – Understanding the Differences
If you’re thinking about selling your home to a cash home buyer instead of going the traditional route, it is good to understand your options before starting a deal. While many people may be familiar with the We Buy Ugly Houses brand, people may not be aware of the alternative “cash for homes” options that are available, so we decided to put together this comparison.
While there are a number of companies out there that will give you cash for your home, each company will differ with how they make a profit, how they calculate their offers, and how they deal with their customers. It’s good to understand the pro and cons of each model when choosing who to sell your home to.
Today we’re going to look at a few of the cash home buyer options available to homeowners today.
- We Buy Ugly Houses Review
- Selling A House Online
- Selling To A Local Home Investor
We Buy Ugly Houses
We Buy Ugly Houses is a recognizable name in most cities. With their bright yellow signs and caveman branding, chances are you’ve seen one of their signs at least once. One thing that many people don’t realize though is that We Buy Ugly Houses is actually a franchise.
They are known for buying even the most distressed homes. Homes with cracked foundations, roof damage, water damage, and homes in undesirable neighborhoods – no matter the situation they’ll make you a cash offer.
How They Price Your Home
Their model is pretty straightforward. They do an assessment of your home, calculate the cost of their repairs, closing costs, and any other typical fees, factor in their profit margin, and give you an offer.
At the end of the day, they make their money once they sell the home, so their goal is to buy the house at the lowest possible price and flip the house as quickly as possible.
Since they will only make a one-time profit on the sale of the home, it’s important for them to maximize the profit on the sale. Ultimately, this means that they’re going to have little to no wiggle room when it comes to price negotiations. So if you’re planning to sell a house as-is in poor condition, they may not be your best option.
A local home investor like SFL Partners is investing in homes to hold them long-term as investment properties. With this model, home investors stand to make considerably more profit over a longer period of time, so in many cases, they are able to offer a bit more money for a home.
The Typical Cash Offer
So while they may make an offer on your home no matter the condition, the offer may be considerably lower than you could get by going the traditional real estate brokerage route or working with a local home investor.
Depending on the market and how quickly they’ll be able to repair and sell the home, they may go as low as 50% below their after repaired market value. This means that if your home has an expected value of $100,000, they’ll subtract all of the repair fees, closing costs, and their profit, and make you an offer between $50,000 and $70,000.
Because We Buy Ugly Houses is a franchise this means that in many ways they operate like a local business and national business all at once. While there will likely be an office you can walk into and a person that you can speak to face-to-face during your deal, once the deal gets started you’ll also be dealing with a “corporate” element.
We Buy Ugly Houses is also only a home buyer and will not list your house on the market for you. They’re simply interested in buying your home to flip it as quickly as possible. A local home investor like SFL Partners will also list your home for you if you’d prefer to try and sell on the market first.
Sell Your House Online
Selling a house online to a buyer like Opendoor.com may sound like a viable option, but typically these deals are more trouble than they’re worth. In many cases, online cash home buyers have fairly strict requirements for the homes that they will buy, so not all homes will qualify.
What Kind Of Homes Do They Buy?
Opendoor.com aims to purchase homogenous homes built after 1960 with a value between $125,000 and $500,000. This means if your home is older, has roof or water damage, or is only worth $100,000, Opendoor simply won’t make you an offer.
Online home buyers are typically operating on a strict formula when determining their final offer price. You can expect to receive at most about 80% to 85% of your home’s value when selling to Opendoor after any fees, cost of the minor repairs, and resale. However, in most cases, your actual sale price will be closer to 50% or 60% of the home’s value.
The Typical Cash Offer
With online cash home buyers like Opendoor or Offerpad, you will typically get a cash offer within a couple of days. Oftentimes, they will need to send someone to your home to perform a physical inspection, and depending on the home location and the market you’re in, this timeframe may vary.
While you may receive as much as 80% of the value of your home, in reality, the price will probably be about 55% of the value. In most cases, the home inspections performed will overestimate for the cost of repairs so that the potential for these companies taking a loss on the property is minimized. However, this means that in some cases, you may end up losing quite a bit of your profit to unnecessary or overvalued repairs.
One of the biggest drawbacks of online home buyers is the missing personal touch. There are countless websites filled with 1-star ratings and negative reviews. HomeOpenly.com, a real estate marketplace, gave Opendoor a 2-star editors review as well as a 1-star user review.
Among the negative reviews are horror stories of canceled contracts, bad paperwork, unresponsive staff, and broken promises. The last thing anyone wants to deal with when closing a real estate transaction is an unresponsive, unreliable buyer.
So while selling your house to an online buyer may seem like the easy solution, it may end up costing you a lot more than you realize.
Selling To A Local Home Investor
If you’re thinking of selling your home, condo, or property for cash, your best bet will typically be selling to a local home investor. Just like in any other business relationship, there will be pros and cons when working with a local business vs a franchise or national business.
While the general approach may be similar, local home investors will be considerably different when it comes to the business model, the level of customer service, and how much cash you’ll ultimately receive for your home.
For example, with a local home investor, you can expect to receive a more personal level of interaction. Once you begin your deal, you won’t be passed around from sales representative to sales representative – you’ll have a dedicated point of contact for the entirety of your deal.
How They Price Your Home
When it comes to making a cash offer on your home, a local home investor like SFL Partners is going to be using a completely different profit model than a company like We Buy Ugly Houses.
Similar to a typical cash home buyer, a local home investor will consider things like the home’s condition, the anticipated cost for repairs, and the current market when making an offer.
However, while your typical cash home buyer makes their profit on a quick home flip, local home investors make their money over a longer period of time. In most cases, local home investors plan to manage and rent the property for years to come and only sell years later once the property has paid for itself.
This means that unlike companies like We Buy Ugly Houses and Opendoor, a local home investor like SFL Partners will be able to offer you a bit more for your home while still remaining profitable.
The Typical Cash Offer
In many cases, the offer that a local home investor will make you will be anywhere from “slightly better” to “significantly better” than the offer some of the larger company’s will make.
For example, a company like We Buy Ugly Houses goes into a deal expecting to buy a house and sell the house within a specific period of time. This means that they have a maximum total profit that they can expect from the purchase and sale of a home. What’s more, the longer it takes them to sell the home, the smaller their profit becomes.
On the converse, a company like SFL Partners is purchasing homes for cash with the expectation of holding those homes for a long period of time.
In most cases, the properties will become rental properties, meaning they will generate income for the investor month-over-month for the time that they retain ownership. This also means that when they ultimately sell the property, there is a much larger opportunity for the total profit margin to be larger than in a quick-flip deal.
While a local home investor may be able to make a better offer than some of the larger companies, the area you are likely to see the biggest difference in is customer service. Just like with any service-based business, a local home investor will be dealing exclusively within their local community.
So while a larger company may handle their sales at a local level and then pass the rest of the deal to “corporate”, when you deal with a local home investor like SFL Partners, you can feel confidant that the person who starts your deal will be the same person signing the paperwork at closing.
Getting A Cash Offer On Your Home
Unlike other cash home buyers, SFL Partners can give you an all-cash offer on your home in about 24 hours. Getting the process started takes about 30 seconds – simply give us your name, some contact information, and the property location and we can get things started.
Best of all, once we make an offer, we can typically close within a matter of days. You won’t have to worry about month after month of property showings and costly property management overhead.