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Do iBuyers Buy Ugly Houses?

Updated: Mar 27

Do iBuyers only buy ugly houses?


For many consumers, the most visible cash buyer over the last 30 years is We Buy Ugly Houses (also known as HomeVestors). If you’ve seen billboards or mailers featuring a cartoon caveman who wants to buy your house, no matter the condition, you’ve run across this company.


So are iBuyers the new version of We Buy Ugly Houses? Or something different?

Let’s dive into some of the categories of buyers interested in your home! For each, we’ll discuss their preferred type of house—condition included.


Large-Scale Real Estate Investors


The largest companies to buy houses are large-scale, institutional-level investors, such as The Blackstone Group. This company owns $324 billion in real estate worldwide, with focuses ranging from mega-apartment complexes in New York City to residential homes in Middle America. Companies such as this have very specific buying protocol, tight financial models, and a desire to get the property cash-flowing as soon as possible. These buyers will tend to place value on predictable properties that can easily be plugged into a financial model.


iBuyers


iBuyers, such as Keller Offers powered by Offerpad, also tend to be large-scale buyers. However, iBuyers are typically more focused on residential real estate. They tend to want to turn properties around quickly, rather than employ a buy-and-hold strategy. Of everyone on this list, iBuyers are least likely to want to hold onto a property. They tend to be the most sensitive about condition because they want to turn properties around quickly and efficiently. iBuyers want to offer fair, easily accepted prices so they can do required repairs and get the house back on the market, fast.


iBuyers typically do not want “Ugly Houses”—unless a minimum amount of paint and polish can make them more attractive to the market.

Read What are iBuyers?

Large-Scale Flippers


Large-scale flippers, such as We Buy Ugly Houses, want to find a deal. These are the companies with white signs by the side of the road declaring “We buy homes for cash! Any condition! 555-555-5555.” They will mail directly to you, and will knock on your door to see if you’re ready to sell. Bigger companies with larger marketing budgets will also often do radio and billboard advertising to attract sellers.


Investors and flippers are willing to take on substantial repairs as long as their numbers make sense. Foundation work, replacing plumbing lines, electrical issues, fires and floods … it’s all on the table! The worse off the property, the more opportunity they have for a large margin. Their offers will reflect the risk they are taking on with each purchase.


Small-Scale Flippers


While large-scale flippers can have many deals going at once, smaller-scale flippers might only have a property or two in process at a time. They tend to be very vigilant about their risk profile and want to win on deals when they buy. One bad deal can tank the future of a small-scale flipper.


Small-scale flippers will take on risk, but that risk is also related to their compensation. As a seller, you’ll need to be prepared to pay a premium to move on from a property that attracts this type of buyer. They’ll buy ugly, for a price.


Wholesalers


Wholesalers are a unique breed of “buyer.” They obtain a property and then sell that contract to a larger buyer who wants to own it. Wholesalers have a network of buyers who they market to whenever they acquire a great new property.


Wholesalers need enough margin to get paid while still leaving room for the additional buyer to benefit as well. As such, they need to establish a high level of profit to make the transaction work. That means that ugly houses can often be the most attractive, because the more repairs that are needed, the more potential for a spread.


Consumers


Consumers, those most likely to be represented by a real estate agent, want to be able to visualize a relatively quick route to a livable house.  Their desires could be similar to that of an iBuyer—a predictable, controlled process to move into their new home. Consumers often need to sell a house as well, and want to minimize or avoid the time spent paying two mortgages.

Read How do iBuyers profit?

Conclusion


In this generalization, we can see that large-scale flippers and wholesalers are the most likely to buy “Ugly Houses”, and everyone else is most likely to want a predictable, controlled repair process. The iBuyer’s goal is quick turnover. They’re not interested in seeing how low they can get the price.


As a seller, if you can afford to make repairs, you can often earn a margin on that effort. Working with a Certified iBuyer Specialist who understands the real estate market is your best chance to choose the route—and the buyer—who is the best fit for you!

Read the iBuyer Process

Written by Brian Gubernick on February 4, 2020





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