“We buy houses” has been a popular saying for years. In advertising terms, it’s a catch-phrase that means “to make a profit.” But it can equally mean a direct house buying branch of a business. Understanding the difference between these two is crucial. Knowing why they are two separate entities and even related is the key to understanding this popular catchphrase.
To better understand the differences between these two entities, let’s compare “we buy houses” with “direct selling.” As the name suggests, the direct seller makes a profit on each home they list. They do this by listing homes in as many areas as possible. We Buy Houses work hard to get houses on the market. Working with their various real estate agents, looking for homes, and trying to find homes within the price range they will sell for. Their goal is not to sell homes but rather to buy homes at their fair market value. These people have no desire to sell homes but rather to buy homes at a profit.
A. The difference between “we buy houses” and “direct selling” comes from how the seller profits on each sale. Real estate agents earn their commissions from each house sold by their clients. These commissions are figured into the final price of the house. It is not considered a sale of property, as it is not the actual home being sold, but rather an arrangement that allows the agent to take a commission on the sales of homes in the area being sold.
B. This profit is not solely from the houses that the agent’s list. It is also from the actual cash paid out by the buyer directly to the seller. In the case of “we buy houses,” this money is first used to cover the commission of the real estate investor who lists the houses, and then it is deducted from the net cash paid by the client for his or her house purchase. This is why the process of buying a house is so much slower than simply selling one.
C. Real estate investors also have the advantage of not needing to go through the red tape involved with home inspections. Because the buyer pays for the inspection of his or her potential home, there is no need for a home inspector. All inspections can be handled by the seller and the buyer, saving the buyer’s time and money in the long run. Buyers can buy a house quickly without needing to worry about any possible repairs or defects.
D. One of the major benefits of “we buy houses” is the opportunity to avoid the often-painful process of purchasing an unwanted property with a foreclosure looming over it. This is due primarily to the fact that when a home is in foreclosure, a great deal of time and money is consumed in attempting to correct various problems that may arise due to the foreclosure. Most buyers are better off avoiding foreclosures altogether. A major benefit of this process is the relatively low costs involved. Most counties require that a property that is going into foreclosure be sold at an auction. This requirement forces the county to set prices sufficiently low to attract buyers but not so low as to result in the county losing money on the sale.
E. Finally, no discussion of “we buy houses” would be complete without addressing the possibility of using cash to finance the purchase of a property. Cash is certainly not a good choice for most homebuyers. The best way to approach home buying with cash is to find a co-signor. The co-signor serves as a legal witness to the transaction, guaranteeing that the deal goes through and that the payments are made on time and for the full amount.
These are three popular options available to investors who are interested in selling or flipping homes. Each method has its advantages and disadvantages, but all come with benefits that can outweigh the costs of the transactions. Do you want to be an investor who takes the same proactive steps to ensure that properties he buys and sells actually sell? Do you want to avoid the pitfalls of selling on your own or flipping without having to do much more than wait for the market to “turn up”? If you answered yes to these questions, you might be a good fit for flipping.