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I'm in the St Louis MO area and a lot of the homes are older, smaller, need repairs, and are not in the best of neighborhoods. The three people I know who have sold homes to the "We Buy Ugly Houses" people all received about half of what they might have sold it for. But the sellers wanted out ASAP, without dealing with repairs, decluttering, listing, staging, bargaining, inspections, etc. These were homes that, in the best of shape, might have sold for 80-100K but would have sat for many months on the market before the right buyer came along. The sellers were not exactly thrilled with the deals, but they did the math and took the money, and got on with their lives.
If a deal looks too good to be true ("WE'LL BUY YOUR HOUSE FOR TOP DOLLAR! NO COMMISSION TO PAY!"), it usually IS too good to be true. As said earlier, these people are in business to make money and you're the money tree they're going to be plucking the bills from.
A lot of them will cover settlement costs since they also have a real estate license. The one who bought the house next door works for Remax. The previous owner didn't take care of the house, rented out rooms and used unprofessional handymen to do cheap fixes, and ignored major repairs. Still, the flipper paid about 90K below normal market value and probably overpaid due to the extensive repairs and remodeling. He tried to sell it for nearly 200K above his purchase price to some sucker and the contract failed to close at settlement. His margin of error was much too low.
I would guess that the previous homeowner needed to put in nearly 100K into the house to get full value. The buyer had a couple of sons who were working there for nearly five months to remediate the interior and hired a few contractors to repair the deck, patio, and fences as well as replace the roof.
People say the homeowners get screwed by these rehabbers, but the previous owner listed the house for 60K below market value and no retail buyers showed interest. One should expect cost overruns when taking over a project with unknowns, and the rehabber found the previous owners had laid tile on top of each other without removing the previous tiles. There were three or four layers to remove before installing the new tile.
Location: IN>Germany>ND>OH>TX>CA>Currently NoVa and a Vacation Lake House in PA
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Originally Posted by AZ Manager
You can get good money on a worn out old junker to a dealer, same goes for houses.
Quick sales are costly, period. You want to offload it without the hassle then you aren't going to get top dollar, ever. We are looking for our next rental and these Offerpad and Opendoor homes are in some of the worst condition I've ever seen. They will charge you for repairs then not do them, slap a coat of paint on it and resell it for more. They are the laziest and most expensive home flippers there is.
On a typical sale to these companies they will pay you under market value for the home then charge you 9-12% in various fees PLUS outrageous repair costs for every tiny thing.
Here is one they bought for $213k ( well below market value) and they took 6% in commission, 3% in convenience fee, and who knows what else for repairs and such. The owner got less than $190k. It is worth about $230k, and they know it. If the owner had just listed and sold it normally they would have taken $215k or about $25k extra in pocket easy, that's 11%+ in profit the owner walked away from. The market is pretty good in the area with around 60-90 days list to close. The relisted house is pending sale, so inspections are done waiting on financing, in under a month.
If you get good money on a junker at the car dealer, he's simply playing with the numbers. I have no idea how you can possibly think otherwise.
Less than a year ago I had to finally buy a new car. My old one was a 2005 2 door Chevy Cobalt. It needed a new engine (it was burning oil and had bent rods), transmission, the gas tank was cracked, and a whole host of other problems; it was worth the scrap metal basically.
So almost a year ago now I went in to talk about buying a new vehicle, never showed up in my own car and never mentioned it upfront. The Mazda CX-5 Touring I bought we agreed on $25.5k out the door; tax, title, extended warranty, all of it included. After we were done negotiating on price I brought up my junker and got another $1k off so at the end I got a 2018 CX-5 Touring for $24.5k out the door on 0% financing.
There was no more numbers to play with, no negotiating based on having the trade, and I got way more for it than I would have even if I had put in a new engine, transmission, repainted it, and replaced anything else it needed ($8k+ of work on a 140k mile 2005). MAYBE if I replaced half the car I could have gotten more out of it than I did, but I doubt it.
Do it right and you can get good money out of a junk car at a dealer.
I called one before we sold our rental property in CA. The market there was screaming hot for low end, first time buyer homes. He offered us about 30% below what we were planning on marketing it at, and then wanted ANOTHER 6% off for no realtor. I asked them what was the advantage to us of no realtor, if we get none of the 6%? He seemed non-plussed by that question. He went on to try to explain real estate commissions to me. I told him I've sold 5 homes, believe me I understand RE, I just don't understand why we should give him a discounted price, and then pay him both sides of a RE commission. I said thanks, but no thanks. We listed it after moving our tenant out and cleaning/painting. In that market, it sold after the first open house in a bidding war with 16 offers. We got 10% over our asking price.
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