Introduction to house flipping
House flipping refers to a real estate investment strategy whereby an investor buys a house with the aim of reselling the house at a profit. In house flipping, profits are usually generated when the house appreciates in value or as a result of renovations as well as capital improvements.
House flipping is undoubtedly one of the most lucrative real estate strategies for most real estate investors today. This is evident according to the latest house flipping statistics. In 2015 for instance, home flipping increased in most U.S markets (75%) according to Realty Trac; a leading provider of real estate housing data in the U.S. The same statistics indicate that approximately 180,000 single family homes and condos were flipped in the U.S. in 2015. The number of people actively flipping homes has also increased drastically.
Statistics aside, you just need to drive for a short distance around your town to see ”we buy homes’’ or ”we buy ugly houses” signs on telephone poles and street signs. These signs let people know that there are companies (house flipping companies) or individuals (real estate investors) out there willing to buy homes regardless of their state. These companies or investors buy and sell (flip) homes for a profit.
Although house flipping companies appear to be great alternatives for homeowners looking to sell their homes fast, some of these companies don’t always operate in the best interests of home sellers. It is, therefore, important to weigh your options before you choose to sell your home to a home flipping company. It’s also important to understand the pros and cons of using a ”we buy ugly houses” flipping company.
It’s worth noting that home flipping companies or investors focus on buying homes at the lowest price possible. In most cases, homeowners get 50-70% of the actual value of their homes. It gets lower if you are desperate to sell. Chances are you will find a better deal by working with real estate agents instead. However, it may take more time and effort to sell.
Deciding whether you should sell your home to a house flipping company is, therefore, a matter of understanding the pros and cons as well as weighing your options. Before you make this crucial decision, here’s what you need to know;
Top benefits of selling your house to a home flipping company
- It’s fast and easy
This has to be the most notable benefit of selling your home to a home flipping company. Selling a home is usually a time-consuming process especially when you are relying on traditional methods i.e. putting up a ’For Sale’’ sign on your yard or interviewing and hiring a real estate agent. The process is usually difficult when you want to sell your home at the best price possible. House flipping companies take away the difficult and time-consuming process of putting up a house for sale and waiting for potential buyers.
When you use a house flipping company/investor, you don’t have to prepare your home for sale i.e. renovate, landscape, etc or market. The companies buy the house as it is and the sale is completed in record time. As long as there are no title issues, these companies typically take 7-10 days to complete the transaction. If you are in dire need of cash, a house flipping company is your best bet. It’s simply about deciding if you want to go ahead with the sale or not after getting an offer, and most house flipping companies pay in cash.
- You are guaranteed of selling your house regardless of the state or condition
House flipping companies or investors who buy old and/or ugly houses don’t really care about the state or condition of your home. These companies specialize in buying such homes, so you are almost assured of selling your home when you choose such companies as opposed to selling your home conventionally. If your home has deteriorated over time, but you want to sell fast without having to do any renovations/repairs, house flipping companies are your best option.
House flipping companies are in the business of buying old/dilapidated/ugly homes. The companies renovate such homes and resell them at a profit. The companies also target lots where homes sit on in cases where it doesn’t make financial sense to renovate. The Arlington and Vienna areas of Northern Virginia have become hubs for real estate investors mainly interested in purchasing homes for their lots. While typical home buyers look for perfect homes to buy, home flipping companies are looking for old, ugly and/or dilapidated homes to buy. In fact, most house flippers will say the uglier, the better. You are therefore assured of a sale even if you won’t get the best deal.
- You avoid hiring a real estate agent
The process of finding the right real estate agent to sell your home can be a difficult and time consuming process. It might take talking to and interviewing numerous agents before you find a real estate agent that you are comfortable with.
- You avoid ”for sale by owner.”
Trying to sell your home on your own is usually a daunting task. Although some homeowners prefer this option to save on real estate commissions, it takes a lot of effort, time and skill to sell your own home. For instance, you need to have good marketing skills to market your home online and offline. Putting up a ”For Sale” sign isn’t enough to draw potential buyers. You need to take perfect photographs of your home and post them in real estate listings online relevant to your area. You also need to avail yourself for showings, negotiate effectively with potential buyers, represent yourself during critical stages of the entire process i.e. buyer’s home inspections, etc.
In a nutshell, you need a variety of skills to sell your own home without the help of a real estate agent. In most cases, it isn’t worth the effort trying to sell your own home without any help especially if your home is old or in poor condition. When you sell your ugly home to a ‘we buy ugly houses’ flipping company or investor, you avoid all the stresses and requirements associated with selling a home without help from an agent.
Top disadvantages (cons) of selling your house to a home flipping company
- You get less than you would if you were working with a real estate agent
This has to be the most notable con of selling to a house flipping company. As mentioned above, you get 50-70% of the actual value of your home, sometimes less, when you sell to a house flipping company. Although this is usually understandable since you are selling an old or dilapidated home and you need cash immediately, you can get much more if you decide to use a real estate agent.
Real estate agents receive a commission from the final sale price, so they are motivated to sell your home and get you the best deal possible. If you find a real estate agent who believes he/she can sell your house regardless of its current condition, you will have a higher chance of making more than you would selling to a home flipping company. It might take more time to sell using a real estate agent. However, you will sell your home at a better price.
It is worth noting that some house flipping companies take advantage of distress home sellers. If you don’t have time and your home is old or dilapidated, you will have to sell your home for way less than the actual value. On the other hand, real estate agents can always advise you on quick ways of increasing the value of your old or dilapidated home even if you are in a hurry to sell.
- Some house flipping companies/investors don’t have your best interests at heart
House flipping companies are uniquely positioned to help homeowners with no other options. As a result, most of these companies take advantage. The companies may justify this by being able to pay cash in a very short period of time. However, homeowners could get the short end of the stick. If you have some time to shop for a better deal or some money to renovate your home, you should avoid selling quickly to house flipping companies. Real estate agents take better care of their clients since their reputation means more to them. A real estate agent will work to get you the best deal possible to protect their reputation and also because they stand to gain from a good sale. House flipping companies are solely motivated by profit.
- You give up all your control
When you choose to sell to a house flipping company, you give up all your control. This is simply because you have no chance of getting a better offer. Since house flipping companies specialize in old/dilapidated homes, you have no control over the amount of money you will get. You can’t negotiate based on renovations because you are selling your old/dilapidated house as it is.
Furthermore, no one else is willing to buy your home at market value in its current state, so you are limited by the offers you get. House flipping companies focus on home sellers who want to sell their homes at whatever cost because they are desperate or simply because they don’t care anymore. When you are in such a position/state, you don’t have any control whatsoever.
If you want to have an edge, you should be willing to improve your home since this is exactly what house flipping companies do. Unfortunately, you may not have the time and money, which is why you may be forced to give up all your control and sell yourself short.
The above information summarizes the most important information to consider when you want to know if you should sell to a ‘we buy ugly houses’ flipping company. There are notable pros and cons of using a ‘we buy ugly houses’ flipping company. If you have an old or dilapidated house and you don’t have time, a house flipping company will come in handy. The companies are willing to buy homes fast in cash regardless of the state or condition.
‘We buy ugly houses’ flipping companies are also ideal when you don’t want to handle the daunting tasks involved when selling your own home without the help of a real estate agent. You should, however, be willing to give up control, work with people who sometimes don’t have your best interests at heart and in the end, sell your house for less than you would when using an agent. It is, however, possible to mitigate the cons by choosing a house flipping company wisely. If you must use a house flipping company, here’s what you need to know;
Choosing a house flipping company
Although most ‘we buy houses’ flipping companies are legit, a number of them are scammers. It is, therefore, important to know how to identify legit companies from scammers. Below are some tips to follow to help you identify and work with the best house flipping companies only.
Tip 1: Do your due diligence
Before you decide to deal with any ‘we buy ugly houses’ flipping company, do through research to establish the company’s legitimacy. For instance, depending on your location, the company in question should meet all the relevant licensing/registration requirements. It’s not advisable to call and conduct business with a house flipping company straight from a signpost without doing thorough homework to establish the legitimacy of the company.
When conducting your due diligence, focus on legitimacy first and then proceed to the reviews. Since house flipping companies tend to focus on their own interests, it’s important to check reviews and see what it’s like working with certain companies. The company you choose should at least be legitimate and efficient even if they won’t have your best interests at heart. Online reviews should help you gauge the legitimacy and efficiency of a company accurately.
Tip 2: Speak to a real estate agent before choosing a ‘we buy ugly houses’ flipping company
Selling your home to a house flipping company is tricky business, and in most cases, you may feel like you don’t have any other option when that’s not entirely the case. As a result, it’s always good to speak to a reputable real estate agent first. You may have more time than you think. A reputable real estate agent is also best suited to give you valuable advice on other viable options that may be at your disposal. You can also get information on the kind of offers you should accept or decline. It doesn’t hurt to talk to a reputable real estate agent before you make a final decision given the cons of selling your house to a ‘we buy ugly houses’ flipping company.