Using a rapid reseller? Slow down and check 'em out

CHICAGO (Sunday, October 23, 2005) - The signs are everywhere, from big, blaring billboards to pieces of cardboard tacked onto telephone poles: "We Buy Ugly Homes." Or sometimes, "We Buy Used Houses." Or simply, "We Buy Houses."

"Ugly" can mean anything from broken-down old relics to places that owners just don't want anymore. But whatever you have to sell, if you decide to make the process go quickly by dealing with the "rapid resellers" who want to buy your hand-me-down, don't expect to get top dollar.

And exactly how much you'll get doesn't always depend on the condition of your property. If you are willing to take your money over time, for example, you may be able to cut a better deal than if you want all your money immediately.

"Everything is negotiable," says Pablo Simmons of Home Seller Solutions, a company in College Park, Md., that offers to "Buy Your Home Right Now." "The job of the investor is to find out what the seller needs and cater to it while still being profitable."

Simmons, who's been investing in "any condition" houses for two years, says he's done deals in which hurry-up sellers netted 95 percent of the true value of their homes. But, in truth, that kind of payoff is extremely rare, according to Dallas-based HomeVestors, the granddaddy of investors with some 250 franchisees in 29 states.

Ken Channal, HomeVestors' director of training, says his people look to earn anywhere from 10 to 18 percent of the value of the house after it is fixed up and sold. That's net after operating costs, the cost of repairs and sales commissions. And it translates into offers that are typically 55 to 65 percent of fixed-up market value.

Real estate professionals maintain there's no good reason for anyone to give away that much money just to be done with it. "They really are a rip-off," contends Mitzi Romiti, an associate broker who hangs her shingle with Jobin Realty in Centreville, Va.

Romiti recently listed a "trashed" condo that the "fast settlement companies would have been happy to buy" for, say, $120,000 to $130,000. But even in the condition it's in -- "two smashed windows and really bad carpeting" -- she says it will easily fetch $200,000 on the open market. "People can make so much more money by putting their homes in the MLS," she advises.

Of course, traditional brokers and agents like Romiti are out their commissions when a property doesn't move through normal channels, so it's natural they'd look askance at such deals. Indeed, one of the advantages of dealing directly with investor-flippers is there is no 5 or 6 percent sales commission.

Still, design psychologist and real estate author Jeanette Fisher says that "no one needs to be at the mercy of these `bottom feeders."' Sure, she admits, selling a house can be stressful. But "if you do just a few things -- give the place a quick clean, de-clutter and line up a lender for your buyer -- people can get rid of their unwanted houses in as little as two weeks at only a 10 percent discount, if that."

However, HomeVestors, whose motto is "Ugly's OK" and has copyrighted the "We Buy Ugly Houses" tagline, says its clientele -- the company is on track to take in 8,000 houses this year -- is made up of three kinds of sellers:

People who have owned and lived in their homes for at least a decade but have not maintained their properties and now are unable to sell through the retail process.

Heirs to houses that may have been vacant and not maintained for a long time, or perhaps houses that are difficult to part with.

Other investors who are tired of being landlords and have neglected their property.

Financially strapped owners who have not been able to make their house payments and are facing foreclosure are "not a big part" of HomeVestors' customer base, Channal says. However, other investors make their livings buying undervalued properties from financially troubled owners, fixing them up -- or not -- and putting them back on the market for quick resale.

The latter group has a rather bad image -- in some cases, well-earned -- as scavengers who prey on other's difficulties. But John Grant, executive director of the National Association of Responsible Home Rebuilders and Investors, says there are numerous honest investors engaged in short-term residential resales.

So, if you want or need to sell quickly, don't want to lift a finger to make your place more attractive to a wider pool of buyers, or perhaps just don't like the idea of putting a for-sale sign in your front yard, then selling to an investor may be the easiest way out.

Be forewarned, though, that choosing the right one takes every bit as much effort as picking a good real estate agent.

Start by checking them out with your local Better Business Bureau, county consumer affairs agency or state attorney general's office. Even Grant says "due diligence" like this is absolutely necessary. "Find out everything you can about who you are thinking about doing business with," he says.

Another way to check is online, say, through Google News (http://news.google.com ). "The media has done a pretty good job of ferreting out the bad apples," Grant says.

Another tip: Look for an identifiable name and place of business with a phone number that answers during regular business hours.

You'll also want to be sure your buyer has the ability to close as quickly as originally promised. "The complaint we hear most often about our competitors is that they do not intend to close until they find a buyer," says Channal of HomeVestors. "Either they do not have their own financing and they ask the seller to hold the note."

Beware of hidden charges, too. No one should charge a fee to view your property or make you an offer. And there should be no sales commission. If someone wants a commission, ask to see their real estate license, says Ardell DellaLoggia of Sound Realty in Seattle. And if they can't produce one, look elsewhere.

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