Home buying companies including those in New Jersey have received a bad rap over the years. And justifiably so. After the real estate market crash, there were several cases of investment companies that took advantage of homeowners at risk of losing their homes. Unfortunately, this perpetuated the idea that all “investors” or home buying companies shared the same intent; to swindle any homeowner in a desperate situation. As an owner of a home buying company, I’m not attempting to vindicate the industry from these unethical practices just because this is my livelihood. The reality is that these things did occur, and like any industry, there are few bad apples that ruin it for the bunch. Even so, home buying companies still serve a purpose in the real estate industry, otherwise they would not be around today. If you are considering selling your house this route, it’s important to do some homework first to ensure a good experience and successful outcome. To help you with that, my objective is to explain what home buying companies are, what they do, and how to go about working with a good one. Hopefully this information will help you make the most informed decision for your situation.
What are Home Buying Companies?
Home Buying Companies are companies that specialize in buying real estate for the purpose of resale to make a profit. The general public knows these types of people as “flippers” or real estate investors. What most homeowners don’t know is there are certain types of real estate investor. While some companies specialize in a strategy called “wholesaling”, others may focus on “rehabbing”. Some residential investors are niche investors that focus on strategies like “lease optioning”. There are several types of real estate companies that make up the market. To keep it simple, homeowners that are interested in selling this route will predominately be dealing with wholesale and rehab companies.
What Do Home Buying Companies do?
Wholesalers and rehabbers are both looking to do accomplish the same goal; to be able to buy low then sell high. The main difference between the two is that the wholesaler is a middleman in the transaction. They work with list of clients such as rehabbers and landlords that buy the property from them at a marked up price. Rehabbers on the other hand are property developers that buy property for their own portfolio to make improvements. They profit by creating equity via the improvements and then selling the houses at a premium on the open market.
Pros and Cons: Wholesaler vs. Rehabber
Wholesale Companies
Pros :
- Can be knowledgeable using creative deal structures and strategies to sell houses fast.
- They have a Rolodex of several different types of real estate investors such as rehabbers, landlords, etc that can buy houses fast for cash.
Cons:
- Many wholesalers are beginner and novice real estate investors. This is due to the fact that barriers to entry in the wholesaling business are few, which means it is relatively simple to start a wholesaling business. It can be tough to find a great wholesaling company.
- They are not end-buyers and will not be buying your house. Therefore there is more risk that the transaction will fall apart, usually because they can’t find a buyer for your house.
- Sellers receive the lowest sale price because they are dealing with the middle man. Wholesalers will offer $5,000 to $30,000 less than a rehab investor to earn a profit.
Rehab Companies:
Pros:
- Rehabbers are generally experienced investors. Home sellers that deal with rehabbers are dealing with investors/companies that will be buying their house direct.
- Often time’s sellers will receive more money for their house since there is no middleman involvement.
Cons:
- Many rehabbers are specifically focused on one strategy which is to buy, fix, and resell. They may not be able to provide the best solution for a given situation.
- It is harder to find these types of buyers (who are credible) compared to wholesalers.
How to Find the Right New Jersey Professional Home Buying Company For Your Situation?
There is no right or wrong with regard to choosing a wholesaler or rehabber to work with. Both types of individuals can work to get your house sold fast AS LONG AS they are competent real estate investment professionals. It is very important to work with a company that can creatively problem solve, and genuinely wants to create a win-win transaction for both themselves AND the seller. My recommendation is seek a company that is capable of utilizing multiple strategies, especially those that buy to rehab for their own portfolio. This way the risk of the transaction not going through is better mitigated since you are dealing with the buyer direct. Plus you may be able to get more money.
Last but not least, ask for customer reviews. If they’ve done right by other sellers, then the chances you’ll receive the same level of service is pretty high!
