The Phoenix metropolitan area has seen new tactics and new technology-based institutional investors entering the residential real estate market in the past year boasting a variety of “We Buy Houses for Cash” options.
Several local brokers are “guaranteeing to buy” your home if you list it with them and it doesn’t sell within a certain number of days.
We’ve also seen national companies like OpenDoor, Zillow, and Knock.com flooding the internet with promises of “hassle free” transactions. Offering to take the stress out of buying or selling a home. It is wise to be educated about the business model for each in order to make good decisions when selling a home. Be cautious, as the price you receive for a cash purchase from an investor who wants to buy low and sell high to make a profit may mean the loss of thousands of dollars to you.
Guaranteed Home Purchase
Real Estate Brokers who “guarantee to buy” your home if they can’t sell it sounds like a great, no-risk option that you shouldn’t let pass you by. If you take a look at the fine print, you might see that there are several built-in price reductions set on a pre-determined schedule so that your home will sell in the timeframe allowed. If it doesn’t sell during that period of time, the listing broker will give you a guaranteed price that is usually much lower than your original asking price. Then they turn around and sell it for a profit which they keep.
Now wouldn’t you rather put that money in your own pocket? This tactic is a marketing gimmick used to get the phone to ring. The safest solution is to find a reputable Realtor who works with a firm that has the market expertise and has a realistic pricing strategy.
Selling Homes For Cash
Companies like Zillow, OpenDoor, and Knock.com have entered the real estate scene with different models.
OpenDoor has a business model that is similar to discount car companies. They will purchase your home at a considerable discount after all their fees. They may pay for some needed repairs and then re-sell it for a profit. So sellers will be leaving money on the table as a trade-off for the convenience of not going through the normal process of selling a home.
OpenDoor also only deals in homes from $100,000 to $500,000 that were built after 1960. If you are outside their range, they will not do business with you. Their sweet spot is between $100,000 and $300,000 which is the hottest price range right now and usually brings multiple offers well above asking price.
Knock.com has a different business model. They concentrate on bridging the gap between buying and selling a home. They will buy your new house for you so you can move out of your old house and into your new house. Then they set about making repairs, if necessary, in order to put your old house on the market. Clients do not have to deal with showings and are able to move into the new home right away. Once the old home sells and closes, they arrange a closing on your new home.
Again, the purchase of the old home can be below market value and is sold at or above market value. Knock also charges normal Realtor fees of 3% on each end of the transaction.
Lastly, the internet-based, industry giant Zillow, in addition to facilitating home searches, has started buying houses in a couple of markets. Their business model also involves buying a home at an investor price and reselling it for a profit; in addition, they also make money selling leads.
Soon Zillow will use their enormous consumer reach to offer to pay sellers cash for their homes. All the millions of people who innocently go online to get a purchase quote will have their information packaged up neatly and sold to real estate agents who are hungry for business. Get ready for more phone calls! That’s Zillow’s biggest money maker – selling leads to real estate agents.
Looking at the bigger picture, as ibuyers enter into the market, these “below market” discounted prices will have an effect on future appraisals. Realtors and appraisers pull their comps from the Multiple Listing Service (MLS). The data collected by MLS on sales of homes will now be corrupted by these discounted sales. This will, in turn, affect appreciation rates and future pricing of home for sale.
A better way to reduce the stress and hassle of selling a home is to find an experienced real estate broker that will work hard to make your client experience a great one and eliminate the stress without eliminating your profit. We have a fiduciary responsibility to our clients. Investors looking to buy your home for cash do not. Who’s going to have your best interest at heart?
With home values going up fast and technology making it easier to reach the masses, it’s no wonder institutional investors are leveraging this opportunity to make money. It is a golden time for investors if they can find someone willing to sell their house at a discount.
Don’t sell your home at a discount.
As a savvy homeowner, your best option is to give us a call to do a market analysis on your home to show you what you can put in your pocket. Houses in the price range these cash investors want to buy will sell at or above market value quickly. Take advantage of my one-on-one, proven techniques. I use aggressive marketing tactics and am always looking out for YOU!
We can help you navigate through this current housing shortage with as little stress as possible. Give us a call at 480-221-3149 or online at classicazhomes.com/contact.