You’ve most likely seen yellow throw away signs on street corners, main thoroughfares, intersections that say “Sell Your House for CASH” You may have received a Post Card, a personalized computer generated letter offering you cash for your home and can close in one day with no contingencies!
Does any of this raise a RED FLAG? “NOTHING IS FREE” You either got to work for it or there are underlining factors that affect these company services. We Buy Houses & Pay Cash! Sell Your Home Hassle Free! We Buy Ugly Houses! Open Door, and many more internet companies offering to buy your home for cash if they do not sell it! “THESE ARE REAL ESTATE INVESTORS”
What is the catch? These companies say they offer NO CLOSING FEES, BUY IT AS IS, NO COMMISSIONS, and many more promises. Like any transaction, nothing is FREE! These investors would not offer services of this nature if they did not make money on you.
So, many of these companies are powered by “Algorithm-powered technology.” One of the most inconvenient aspects of buying a new home—and offloading the old one—is lining up move-out and move-in dates. Typically, people need to sell their old place before buying the new one because they simply need the money from their existing home to pay for the new one. But doing so can result in a gap between moving dates, requiring temporary housing.
They work like this: These companies, dubbed (iBuyers,) make cash offers for your current home at an algorithmically determined “fair market price,” allowing you to take the money, buy your next home, and move out at whatever date works best for you. The transaction closes in a matter of days.
The companies then clean and fix up your old house and sell it on the open market, collecting a fee from the seller. And because the price at which iBuyers buy the house is usually not the maximum the house would fetch if it were sold traditionally, they likely make a small gain on the sale price.
iBuyers resist being labeled “home flippers” because of the negative connotation (the practice has been “shown to diminish” cities affordable housing stock). It boils down to a financing instrument. The companies essentially extend a line of credit to a home buyer using the existing property as the collateral. Customers then use that line of credit to buy a home.
I have many financial institutions that will offer you the same tools, allow me to market and sell your property for the highest and best offer while giving you the flexibility to purchase your new home. I do this all the time for my buyers relocating from all over the United States.
The key difference is that iBuyers do not collect on the loan through monthly mortgage payments or by selling the loan. Instead, they collect on the loan after the move-out by liquidating the collateral—the old house—for more than they paid for it.
Do you want to capitalize on the most you can get for your existing home and still have the flexibility to purchase that new home wherever it may be located? RE/MAX agents do this all the time.
Some old and some new technology! Investors capitalize by leveraging capital to purchase Real Estate for much less than you could ever imagine and how they do it. I’ll cover this in another Blog. It’s simple, your investment is minimal and your rate of return, (ROI) may set you up for life!