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How “We Buy Houses” Companies Work

how we buy houses companies work

If you need to sell your house fast, you’ve probably noticed ads for the companies that buy houses in any condition. Whether they’re ugly houses, damaged houses, hoarder houses, foreclosure houses, or something else. Lots of sellers just like you have tons of questions. And that’s where this blog post comes in to help.

The most common questions about we buy houses companies include:

  • Are “We Buy Houses” companies legit?
  • How do house buying companies make money?
  • What are the pros and cons of working with these companies?
  • Will I get ripped off?

Below you will find answers for each of these questions so that you can learn how house buying companies work and how to determine if selling your home to one of them is a good choice based on your specific situation. But first, it’s important to know who the house buyers are and how they make money.

Companies that buy houses in any condition are real estate investors, flippers, land developers and wholesalers. They look for properties that need expensive repairs, are in foreclosure, or have severe damage that make them unlivable.

House buying companies look for properties in areas where newly built or completely remodeled properties sell at a much higher amount than old and run-down properties. Because the costs to rebuild or restore an old house can be quite high, the owners of the house often lack the money to make the needed repairs. On the other hand, companies that buy ugly houses often have business financing that allows them to purchase these houses and repair them. Because these companies do this for many properties, putting a significant amount of money into renovating a home isn’t as risky for them as it is for an individual homeowner.

Because the we buy houses companies do not plan on living in a house after they buy it, and because they often have their own teams that can do the renovations, these companies can normally turn a profit no matter what the original condition was when they bought it. This is why it might be a good idea to contact one of these companies if the costs of repairs for your house are so high that you can’t afford to fix it.

Now that you know why these companies might want an ugly house, here are some questions and answers you can ask to help you determine which one to sell too, if it is right to sell to them, and whether or not they are legit.

FAQs About House Buying Companies

Are House Buying Companies Legit?

Yes. The majority of them are real estate investors that purchase distressed, infested, burned down, flooded and even murder houses. These buyers take over the debts from the bank and they renovate or rebuild the property hoping to turn a profit from the rehabilitation. But you have to be careful because even though most are legitimate businesses, they’re not all created equal.
Some will be genuine and want to help you out of a bad situation—like recovering some money from the sale of your home, instead of having a bank foreclose where you lose everything. But others will pressure you to think their offer is the only one you’ll get, sort of like the stereotypical used car sales person. Below, we’ll give you the key to identifying these pushy people.

How to know if a house buying company is a scam:

To find out if a home buyer is a scam, rely on their reputation. Reputation is everything and you should never feel like the house buyer is hiding something from you. By asking and checking their answers on a few questions you can have peace of mind that you’re dealing with a professional buyer.

  • Question 1: Are they rated by the Better Business Bureau?
    Answer 1: They should not only be rated by the BBB, but they should also have a high grade. You can find BBB ratings at https://www.bbb.org
  • Question 2: How many homes have they purchased?
    Answer 2: They should not only be able to tell you how many homes they’ve purchased, but they should also be able to tell you why your home is a good fit for them, just like they should be able to tell you why their solution will be a good fit for you.
  • Question 3: Will they provide proof that they have money to buy your home?
    Answer 3: They should do this without any objection. If they don’t, you have to wonder what they’re hiding. The most solid proof of funds is a copy of their actual bank statement showing how much money they have in their account(s).
  • Question 4: Do they have a physical office you can visit or are they a “virtual” company?
    Answer 4: If they don’t have an office or won’t meet you in person, again, you have to wonder what they’re hiding.
  • Question 5: Do they make you pay a fee?
    Answer 5: Legit house buying companies should cover all commissions, closing costs, and other associated costs with the sale of a property. Remember that these companies make money by improving the real value of the property, mostly by renovating it. If they are asking you to pay a fee, you may want to consult with a few other companies in town.

How do we buy houses companies make money?

We buy houses companies make money either by renovating a property so they can sell, or “flip” it at a higher price, or by renting out the property and waiting for prices in the area to increase. A few examples of these situations include:

    • If it is an up-and-coming neighborhood, they’ll look for foreclosures and houses which are about to be sold at an auction. This way, they can buy property at a good price and wait for neighborhood prices to increase. Then they can either sell the land or build a new home and increase their profits.
    • Another way they make money is by buying, renovating, rehabbing, or completely rebuilding the house, and then selling it for a profit. This is often in neighborhoods that are still desirable locations, but are filled with many older or damaged homes.
    • The third most common way house buying companies make money is by buying the building or land, renovating it, and renting it for a higher price than their monthly mortgage and expenses.

How does the we buy houses process work?

The we buy houses process works in three steps:

  1. The investor meets with you to tour your property and identify any issues.
  2. If interested, they’ll research comparable properties to figure out what the value could be after they invest in renovation and rehabilitation.
  3. They’ll make an offer, and if you accept, they’ll begin the closing process, which can take anywhere from one to several weeks. Once the final settlement takes place, you will receive the proceeds due to you from the sale.

What kinds of houses will they buy?

House buyers will purchase all kinds of homes including:

  • Damaged in disasters like floods, fires and tornadoes
  • With foundation problems
  • That have infestations including termites, bedbugs, mice, roaches and more
  • Where murders and violent crimes took place
  • Previously owned by hoarders
  • That have damaged roofs, ceilings and structure problems
  • Which need pipes and HVAC systems fully replaced
  • Rented houses where the owner is a tired landlord

By using the information above you’ll be prepared to work with the we buy houses companies. You’ll know how they work and you’ll be able to figure out whether they are a legit company you can trust or just another scam.

Crucial Questions

Make sure you're dealing with a reputable company that keeps their word, so you don't end up in a lose-lose situation.

If somone cannot answer yes to all of these questions, how can you trust them to do what they say?

Work with Express Homebuyers and you'll have both Peace of Mind and Cash In Your Pockets.

  • Do they have proof of $$ in the bank that shows they are making an honest offer?
  • Do they have an A+ rating by the Better Business Bureau?
  • Do they have video testimonials from actual customers that they can show you?
  • Will they provide up to a $20,000 cash advance to help with expenses when moving?
  • Do they have a physical office and staff to help you through the entire process, or are they just working out of their car?

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