Why do people buy houses? Why do real estate agents recommend these types of properties? The answer lies in the incentives created by these properties. The concept of “upside-down” real estate is fairly new and still has not caught on with most of the general public. The purpose of We Buy Houses is to assist property owners with little money to buy houses in almost any condition, with only a down payment.
Even if these are merely legal or material problems, they will buy your property without considering its market value. Sellers will often have less than cash flow to enter into a transaction. They are forced to rely upon the real estate agents to act as co-workers and go-between when selling homes to cash-flowing buyers. These agents, who make their living by selling homes and therefore are naturally partial to sellers, will generally push the seller to make the repairs or agree to a sale despite their own repairs.
There are two potential reasons for why this occurs. One is that they feel they have little control. When they consider flipping the property, they often look at the cash flow situation first. From that perspective, they realize they have little say as regards the condition of the house. From a strict cash flow perspective, they may believe they have little say about whether they can sell it in a condition that will make money for them. This is especially true of real estate investors flipping a house.
Another reason is they believe the market is going to rebound. They think prices will rebound strongly shortly, and they want in on the ground floor because of the upside potential. It is also common to see investors buy houses for cash flow purposes only. They are aware the house has some repair issues, but they figure the cash will be better spent than waiting and repairing the problems. I believe these types of investors are rarely successful at flipping homes and making money with real estate.
Flipping a house is a competitive business. You really need to know about your competition. For example, if you work in the commercial real estate field, you know many agents who flip homes and do nothing with them. A similar situation exists in the real estate agent field. You need to find a group that is motivated to help you sell houses.
I would suggest you locate and become involved with a small network of homeowners willing to help you buy houses. I believe these homeowners are motivated sellers and will not let you have a title loan to fix the repairs on their house. The key to this is to set up a meeting or lunch with these people. Many real estate agents skip this step and assume the seller will pay the necessary expenses to fix their house. They are usually wrong, and it costs them money.
Now, if you are a cash buyer, there are a couple of key advantages to working with a group of sellers. First, since you will be investing cash, you can fix your own houses. Second, you will get credit for the repairs. If the repairs cost you more than the house is worth, you can use that money to invest in other properties. Some sellers won’t allow that because they don’t want you spending their money on repairs.
These pros and cons should help you know what to expect when working with real estate agents and house flipping companies. There are pros and cons to both methods. I recommend you research each method to determine which is right for you. It might take a bit of time and effort, but the work will pay off in the end. Once you know how to buy houses and flip them, you could have the freedom to enjoy life!