“We Buy Houses Houston ” signs in Houston? These type of signs are all over Houston, Los Angeles, and even Baltimore. What are they all about? You’ve seen them driving around town all over the place. Some are pre-printed and some look like they were handwritten by a 2-year-old. Are these put out by Real House Buyers that can pay cash for a house? Or are these some sort of scam?
You have likely seen these types of signs all over Houston, TX and likely in almost any city you’ve ever been to. Usually in older neighborhoods. Right now in Houston, we are seeing a lot in 77587 and 77028 in South and East Houston. They are usually on a wire stake and it sort of put up randomly at intersections or stapled onto light posts.
They usually say something like ” We Buy Houses Houston TX ” or “I Buy Houses Cash Houston” or something along those lines. There are all types of I buy houses signs, usually yellow and black or black and white or blue and white.
You might be driving by thinking are these guys real Houston Texas House Buyers? If you call that number will you actually get a cash offer from a Real Cash Buyer? The Answer a lot of times is Yes!
These signs are called bandit signs by local investors and investors have been using them for many years as a way to find sellers with dumpy homes who want or need to sell fast. Usually people in some sort of foreclosure, divorce, inheritance, tax delinquency or probate situation. Or maybe just people with a house that is dirty and they don’t want to clean or a house that hasn’t been updated in 40 years.
At Texas Fast Home Offer we are CASH BUYERS IN HOUSTON and HOUSTON and we can make a cash offer on your house in 24 hours as well! But we do not use these signs …simply due to the overall hassle of putting them out and collecting them and also the fringe legality of the signs in many parts of Houston.
But be assured many people using those signs ARE REAL cash Buyers and they will make you an offer. But…there is a catch……..
There are 2 types of Investors who put these signs out.
The first group of investors is called Wholesalers. These guys are not looking to buy your house. They are looking to get a contract to buy your house. And they will actually sell that signed contract to another investor that has cash that will then end up buying your house.
For most people that is not a big deal as long as they get their money at closing….the problem is right now since Houston is so Hot there are a lot of new wholesalers that are offering way too much to purchase a home and then they can’t sell the contract and they don’t have the money to buy…..so what that means to a seller is they are stuck in a contract with a buyer (Wholesaler) who has no money to close on your house. (They will likely try to renegotiate or extend the closing timeline etc…while they figure this out and try to find a real buyer). This may have already happened to you, I can’t count the number of people I bought houses from that had this happen to them before I came along and bought their house.
The second type of investor is an actual cash buyer who is closing on the house and not selling the contract. Usually dealing with them will be easier and smoother ..because they are actually closing on the house and there are less moving parts. WE ARE CASH BUYERS.
“So you are saying that there 2 types of investors putting out “We Buy Houses Houston” signs ? One type has money to buy my house and one doesn’t…..How then do I know what type of investor I am dealing with when I call a number off of a “we buy houses Houston” bandit sign?”
Excellent Question! One way to make sure you are dealing with an actual cash buyer is to ask for $2,000-$5,000 in Earnest Money Deposit when you sign a contract. That will let you know the buyer is serious (If they don’t have 2K-5K for Earnest money…….they probably don’t have 100K+ to buy your house!).
I have heard of people using $10 or so as Earnest Money…if someone uses that as Earnest Money that is a RED FLAG! I would not recommend signing a contract to sell your house fast houston where all of the buyers are pledging and standing to lose if they don’t close is $10.
Some people think these bandit signs are “scammy” or not from “real” Houston Texas House Buyers. Truth is, I know real investors who put out over 500 of these signs every single month! They tell me that the signs cost about $3, the stake s about $.50 cents, and they pay $1.50 for labor to pay high school kids to put them out. So total cost to the investor comes to about $5 per sign put out. Now if you do the math this guy is spending ($5×500 signs) $2,500 Per month on this sign marketing!
Trust me……no one would do that consistently for no reason! People do that so that they can connect with people that have a house that is not suited for the traditional real estate market and buy it from them. Some of these people putting out “We Buy Houses Houston” signs out do have money to spend and in many cases are legitimate businesses that are Houston House Buyers.
The main goal for the investor putting out the sign is for you to see it and call him. Then he can make you an offer and get the home under contract and buy the house at a price that will produce a profit on a rehab/flip. Sometimes he can get you the price you want and it becomes a win-win deal.
What type of offer can you expect from Houston Texas House Buyers putting out “We Buy Houses Houston” Bandit Signs?
Usually, in Houston, people use a Formula. Right now people are offering anywhere between 70% of “After Repair Value” . After repair value, also know as (ARV), is the value of the home if it were in retail sales condition. In a condition where the investor is able to sell to a retail buyer using a conventional mortgage.
Easy Math: For example, if the house will sell for $100,000 to a buyer with a loan after it’s fixed up but needs $10,000 in repairs. An investor could pay $60,000 for that house. 100.000 x.7= 70,000 and then -10,000 = 60. For them they will expect to spend $10,000 in Repairs, $10,000 in sales costs and $10,000 or so in holding costs (property taxes, insurance, had money loan payments, etc) and profit about $10,000 on a deal like this.
Most investors use this calculation, including the people you find online, on bandit signs, the radio, tv commercials, billboards, or the people sending you direct mail about buying your house. They are all using the same basic formula of .7x ARV-Repairs. What investors call the 70% rule.
I’ll give you an example more in line with what I’ve seen so far in Houston.
For example, your family has an old house in South Houston that none of the kids want. The house has Mold, Leaking Roof, Bad Foundation, and has Junk piled 3ft high throughout (I’ve bought several like this in 78748). It also has some crazy beehives outside…and a nice Rat Colony… And let’s say the house needs $50,000 of work to get to a good condition. And the house is worth $300,000 Retail in good condition.
The offer you would get on that house would be $160,000.00. This is how an investor would come up with that. 300,000x.7= $210,000 than from there you subtract Repairs -$50,000 and you get $160,000.00. Based on exact condition, location, etc your offer could be a little higher or a little lower but it will be really close to that. In fact that is exactly what we paid for this house we bought.
That is sort of the quick version of what a Houston Texas House Buyer would do. This is what we do and this is what some of the guys putting out “we buy houses Houston” signs do. There are a few more details but those are the basics.
Houston House Buyers like us will pay all closing costs and that $160,000 that we paid the seller was the the NET cash to her and she came out of pocket $0. (Not all investors work like this but we do at Texas Fast Home Offer and I am aware of other investors that pay all costs and make all cash offers as well, and some that don’t so make sure to ask about this and put it into the contract).
Hmmmm…tell me again… how do they come up with that Formula? Will they always make money buying a house at that price?
Let’s review again. At the Surface $160,000 looks like a great deal for a $300,000 house that needs only $50,000 in repairs. $160,000+$50,000+ $210,000, so they make $90,000 on one flip right?
…..NOPE…..Would be great for Houston house Buyers if that was the case. But really a Houston House Buyer will have about 10% sales costs when he sells (6% to pay Realtors+ cost of Inspections/Appraisals/Surveys, etc) plus seller’s portion of closing costs when he buys your house. Also, a Houston house buyer will have holding costs paying monthly for the property taxes, insurances, city permits, hard money loans etc…plus he will likely have delays and cost overruns.
Some Houston House Buyers that buy a house like the one in this example will lose money and some will make some money, but not $90,000. I would expect to net about $30,000.00 if I did this flip with our company. That’s a decent return for the risk involved on a $300,000 Project. It’s a 10% return which is what we shoot for on all of our projects. (We made $16,000 on the example listed when it was all said and done).
Sometimes Houston House Buyers over-estimate the after repair value and under-estimate the repair costs and time required to complete the project. Or sometimes the market price changes in the 6 months it took them to rehab the house
But at about 70% – Repairs purchase price most Houston house buyers should make at least some money as long as they don’t have any big surprises.
But…they will lose money if the market turns…for example, I know Houston House Buyers that bought in late 2006 at this formula of 70% – Repairs and lost a lot of money on their projects when market prices went south.
Why would a seller sell for what seems like such a low price to Houston Texas House Buyers like this, putting out “We buy houses Houston signs? Would it make sense to the seller?
Well, I’ll give you an example. Let’s say you live in Orlando, Florida with your family and you just came in for the weekend to check out a property you inherited. The house is dumpy and will not sell on the retail market because it will not qualify for financing (most regular retail buyers need bank loans to buy homes). And you don’t have the money or time to fix it…or don’t want to spend the money or time to fix it. Then yes it would make perfect sense. In fact, as Houston House Buyers we buy houses from people in this exact situation all the time. This is what happened with the house in this example. The siblings that inherited the property did not want to come up with $50,000 and have to manage an entire rehab project. So they sold as is , they were very happy with the sale as our most of the people we buy houses from. We’d love for you to check out our testimonials.
In this case listed above, you are exactly who the Houston House Buyer that put out the “we buy houses Houston” sign is looking for. And this should be a Win-Win situation for both you and the Houston house buyer. Well…… assuming the Houston house buyer that you called makes money on the flip.
Also, a new family will get a really nice updated home for them to live in. And the neighbors will be glad the neighborhood eyesore will be gone. So neighborhood is nicer, you get some cash fast for a house you had no use for, and the Housotn house buyer can turn a profit for his work. That is win/win/win all the way around and those are the deals we like to here at Texas Fast Home Offer.
But wait….so MOST SELLERS would not want to sell this way right? Just people with unkempt houses or people that need to sell really fast?
YES! If the house is not REALLY beat up. Sellers should be able to fix it up and make it financeable and get a little more than what Houston house buyers will pay from a retail buyer on the open market by listing with a Realtor. But keep in mind the seller will need to pay for repairs and updates and then wait several months for their buyer’s financing to close if they put it on the market.
Also home sellers must remember to keep in mind when making comparisons of a Cash offer to a potential Retail offer. To back out the 6% they will pay realtors to sell the house, plus back out repair costs, plus any title fee’s, closing costs, and other escrow costs and holding costs until you sell. (Along with costs of survey’s, inspections, appraisals, etc…)
So are the people putting out “We Buy Houses Houston” signs only looking for crappy houses?
No, not necessarily, Houston Texas house buyers are looking for anyone that needs to sell fast and will sell at a slight discount in order to do so. Because they pay cash and can close fast they add that value to you and can get a discount for that. In fact I have bought perfect homes before at a discount many, many times because sellers just anted to sell fast. Here is an example of a really nice house we bought like that.
In addition to neighborhoods with old homes, you will see these “we buy houses Houston” signs in areas with newer homes. These signs might also say “stop foreclosure fast Houston” or ” Avoid foreclosure ” or something along those lines.
Sometimes people in these areas need to sell but they don’t have enough equity to pay for the sales costs.
For example, if there is not enough equity to cover commissions and costs of a traditional retail sale through MLS, the investor may try to obtain the home through a “mortgage assignment”, which is essentially taking over the payments. So the investor will take over the payments for you, this is also called subject to investing. Here Texas Fast Home Offer we also take over payments for people who do not have enough equity to sell.
Usually, when Houston Texas House Buyers are putting out these signs they are looking for sellers for whom a certain issue or “situation” is more important than the sales price. Sometimes sellers care more about a quick easy, cash closing than they do about getting top dollar. As Houston Texas House Buyer we buy houses like this all the time. If you are in this situation click below to reach out to us now via a quick submission online and we will make you an offer in 24 hours or less.
If you want to sell your house fast Houston, we are Houston House Buyers! We’d love to make you an offer. Click here now to fill out the 30-second form and know EXACTLY when you can sell and EXACTLY how much you can sell for!
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