What to Know about Flipping Companies

Last year, house flipping in the US experienced a significant drop in activity. According to the Home Flipping Report curated by ATTOM Data Solutions, only 207,957 family homes and condos were flipped in 2018, a 4% decrease from 216,537 in 2017.

However, this recent downward trend does not mean that home flipping is going away. In fact, the market is still full of investors who are ready to flip or buy and hold (to rent out the home), especially in areas with low housing prices. Just drive around the average American town, and you will still see plenty of “we buy houses” signs placed on buildings or roadside light poles.

This means that there are still a significant number of people out there who would like to flip your house for a profit.

If you want to sell your home fast, flipping is a great opportunity to make money. However, before you dive in, you should first know what to expect when dealing with flipping companies.

What’s there to love about flipping companies?

Dealing with a flipping company comes with some great perks for sellers:

Selling To An Investor Is The Fastest Way To Sell Your Home

It is a quick and easy way to sell your property “as is”.   An investor will buy your house with cash and close in 30 days or less.  That’s the only way they really have leverage.  If you were approached by an investor that needs more than 30 days then chances are good that they are not a true professional investor or that they are an institutional investor (one with layers of corporate bureaucracy and broken promises).

Selling To An Investor Is Convenient – Usually Means No Repairs!

Unless your home is in great shape, it will be difficult to sell it yourself, especially if you are asking for a high price. You will need to carry out repairs and may have to hire a home inspector to identify which major problems need to be addressed prior to a sale.  This means that the only decision you have to make when selling your home to a flipping company is “to sell” or “not to sell”. You don’t have to worry about what repairs are needed to make it salable.

Fortunately, a flipping company eliminates this burden. They are willing to buy your house no matter what condition it is in.

Unless you practice regular maintenance, your home can deteriorate rather quickly. Even if your home is in a dilapidated state, a flipping company will still likely buy it. The price may be low, but you will still get something from the sale.

Selling To An Investor Isn’t Always Giving Away The House

Lastly, selling your home to a flipping company saves you from the challenges of selling the property. Selling a home as an owner can be extremely challenging. While it saves you some money on paying an agent, it requires a lot of work on your part.   Over 80% of the time you will fail at selling your home yourself.  If you hire an agent you can expect to pay 7% for commission and closing cost for the buyer.  If you add in needed repairs for the loan and mortgage payments (because the closing date is 60-90 days out) you’re in excess of 10% !  Compare to selling to an investor in an all-cash deal with no agents and no closing costs and closing in 30 days or less.

Do you have the time and energy to do all that was just mentioned? If not, it may be best to consider those “we buy houses” signs and deal with a flipping company.

What’s there not to love about flipping companies?

While there are many advantages in dealing with flipping companies, there are also reasons why you should be cautious about working with them.

Usually, You Make Less Money Overall

Remember—one of the main reasons why flipping companies buy homes is to make money. This means that they will not buy your home at a price that is anywhere close to its actual fair market value, especially when it’s in need of repairs (to obtain fair market).

This is the opposite of selling your house with a real estate agent, who will try to make you as much money as possible from the sale.

Fewer Guidelines & Traditions

When you work with a real estate agent, there are typically things that happened that are governed by the state’s licensing laws.  Agents, in general, have to look out for your best interest (at least they are supposed to) and use contracts that are designed to protect all parties equally.  Things like disclosure statements are common.

Investors, on the other hand, may bring their own contract designed to protect them (not you) and may engage in unorthodox negotiations.   This is why it’s important to interview investors before moving forward so that you can trust what they are promising.

How do you choose the right flipping company?

When assessing a flipping company, check if they:

  • Are paying in cash – Ask for proof of funds.  This is a term they will know well.  A recent copy of an actual bank statement is preferred.   IF they hand you a letter that states they can get a loan, it’s not cash.
  • Does their contract have an inspection contingency? – This isn’t a make or break deal.  In general, it’s good practice to let any buyer inspect your property.  That being said you want to make sure you set your expectations.
  • How Quick Can they Close? – You might need longer if you are living in the home, but in general, if you are looking at companies that buy houses in any condition then you’re likely looking for a fast sale.

While many flipping companies are legitimate, there are some that are not. Keeping this in mind, you should do your due diligence when selling your house to these companies. Carefully do your own research to make sure you are dealing with the right people.

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