What's the Deal With Those "We Buy Ugly Houses" Signs?

Home selling has rapidly expanded to new technologies, from mobile apps to virtual video walkthroughs, but one niche of the industry is decidedly old-school: a sign on a utility pole, offering to buy your home quickly as if it were an old bicycle.

You've probably seen them around town, most likely when waiting at a stop sign. Sometimes they are professionally printed; other times they are written on construction paper with a Sharpie. "Cash for Homes Fast," they promise. "Got an Ugly Home?" they inquire. (Photo by Mary, Flickr/CC)

We're all for supporting low-tech solutions, and home selling thrived for generations before the internet and smartphones. At its heart, it is a transaction between people. But surely the kind of homebuying experience that starts with a sign on a tree isn't like other experiences.

Here's the deal with those "We Buy Ugly Houses" signs.

Who's Buying Ugly Houses?

"Most of those 'We buy ugly houses' signs come from people who've read a Get Rich Quick in Real Estate book," says longtime Realtor Dave Sutton of Portland, Oregon. The book told them they could "buy houses for 'half what they're worth' and sell them the next day for twice as much, doing no repairs. I don't know whether the bigger scam is the books that promote that or the people who try to do it."

Those signs are slapped up by house flippers. Some make enough money to rent proper billboards, giving them the appearance of established real estate firms, but the business model is the same: Buy well below market, and sell immediately. They hope to take advantage of a homeowner's desperation to sell.

Some Sellers Are Desperate

Some people inherit a distant home and can't wait to wash their hands of it. Others know that their home needs serious repairs and are willing to settle for 75% of the market value and sell the problems to someone else. Still others might have to relocate suddenly, such as to care for an elderly parent, but agents won't take the listing until the roof gets replaced.

In short, some people could benefit from a "we buy ugly houses" offer. They won't financially benefit, but they can rid themselves of the home and its problems in exchange for accepting what will probably be a shockingly lowball offer.

"I wouldn't sell your home to a 'we buy houses for cash' company unless you are desperate," advises real estate broker Joseph Hernandez of Impac Realty. "They will offer you about 60%-80% of the value of your property."

Their business model is to buy today and sell tomorrow.

Unless your home has serious problems and you have no time, you will make the most money selling the home through normal channels. Hernandez says, "If you live in a seller's market, you should be able to sell your house fast unless there are major problems with your home or area." Examples of such problems include a poor floorplan, major problems with the foundation, the home's history as a drug den, or a crime-ridden neighborhood.

Don't Let a Few Repairs Scare You Into Selling Low

Right now the housing market is so hot that "ugly homes" are selling too. Eager buyers aren't discouraged by peeling paint, old carpet, or a cracked driveway.

If you think you need to make certain repairs before trying to sell your house, think again. Someone will probably want to buy it as-is, and right away. Who needs a "cash fast" offer from a house flipper in a market as sizzling-hot as today's market?

"Regardless of price point, there are multiple offers on every single home right now," says real estate agent Thomas Brown of The Agency Texas. "I've never seen anything like it, and the reality is it's not going to stop anytime soon."

Ugliness Is in the Eye of the Beholder

These house flippers don't want all ugly homes. If your home is a real fixer-upper, requiring weeks of repair to be safe and sellable, even someone who advertises for ugly homes on a lamppost probably won't want it.

Their business model is "to buy today and sell tomorrow," explains Sutton. "They know they can't sell for more than the market, so if they're going to make any money on the sale they must buy below market. They also don't want to buy homes that need significant repairs or upgrades to sell at market (roof, water heater, kitchen, baths, carpets, windows, etc.)."

Predatory house flippers will hire cheap contractors to make the minimum of repairs within days in order to get the home on the market. They don't want big jobs, even if their sign says, "No Home Too Ugly!"

Conclusion

You can do better. In today's housing market, people are quickly selling homes that need the kind of repairs and upgrades that would have been roadblocks before. If a fast cash offer is your priority, look into the cash offers you can get through Zillow (Zillow charges a steep commission, 7%-8%) before you try calling a number you saw on a tree.