Selling a house quick and cheap

Companies that promise to buy homes for cash will do it, but their lowball offers probably will appeal only to desperate sellers, Bankrate.com's real-estate adviser says.

By Bankrate.com
Q: Our house has been on the market for nearly eight months. I recently transferred jobs to another city, and we desperately need to sell because we are now paying two mortgages.

Should we relent and turn to one of those "buy your house for cash" operations? How do these businesses operate, and how much do they typically pay?

A: Most of these companies are legitimate and basically play the role of a fast-acting, lowballing investor. The larger buyers have good credit lines and can close deals pretty quickly. But they usually pay less than smaller investors -- sometimes much less.

Still, these businesses have a broadening spectrum of customers in today's market. Sellers include those trying to avoid foreclosure or sell off recently inherited property, homeowners caught in less-than-desirable mortgage structures, people who owe a multitude of back taxes and those who are retiring, downsizing or going through a divorce.

Or, as in your case, they may be transferring jobs. Some sellers don't want to go through the machinations of multiple repairs and welcome the convenience of a quick disposal.

The pluses are that such operations pay cash, move quickly and buy "as is." Many will also pay most standard closing costs. The minuses are the deep discounts they command. Critics say they welcome unsavory elements in some neighborhoods when they convert homes to rentals. Proponents counter that they actually help prevent blight by ridding neighborhoods of poorly maintained homes.

What do the companies pay? That can vary widely. Most of them use software to analyze how much a home will cost to repair and how much to offer for it. Officials of such operations have told the media in the past that their aim is to buy at about 65 cents on the dollar, although in some particularly depressed markets that number has dropped to as low as 50%, particularly on condos. Some will merely try to gauge how much equity you have in a house and offer that and little more.

As you might expect, these are some of the lowest of the lowballers out there. The deep discounts, they say, allow them to renovate the place, pay for utility and maintenance costs while it's under renovation, and market the home once it's ready to resell. When these homes are repaired, the firms or their franchisees resell the properties or add them to their rental portfolios.

These days, more of these "opportunity investors" are cropping up. The big and established ones, such as the heavily capitalized HomeVestors, focus mostly on starter homes and rental homes in the $100,000-and-under category in older neighborhoods. But as home values continue to drop and conventional sales slack, some have started picking up higher-dollar houses.

How does the process work? Representatives will come to your home, give it a thorough and free inspection, make their assessment, then make you an offer -- usually within a few days. It will be limbo-low, of course, and they expect you to haggle. Be sure you make at least a couple of counteroffers if you are going this route. If their low offer doesn't offend you, your return offer won't offend them.

With housing prices falling and mortgage money scarce, foreclosures are going through the roof. Homeowner Merian Terry thought she'd escape that by taking an offer to help that turned out to be too good to be true.

Make sure you check with the Better Business Bureaubefore making any commitment. There are more and more scammers out there. Ideally, the company will belong to an organization such as the National Association of Responsible Home Rebuilders and Investors.

To employ an overused term, these companies "are what they are." Most nondistressed sellers won't bite at their offers, however. You may be better served finding a midpoint between their offer and your current asking price and re-listing the property with a different brokerage for that median price for no more than 60 days, then see if that scares up any new offers -- if you have that much time, that is.

This article was reported and written by Steve McLinden, Bankrate.com's real-estate adviser.

6 tips on home sellers' freebies

6 tips on home sellers' freebies

Incentives offered by builders and homeowners may be tempting. But accepting them is not necessarily a good idea. Instead, buyers should look on them as an opportunity to start negotiating for something that might be more useful.

By Marshall Loeb, MarketWatch

But remember: The gratis offer is little more than an excellent opportunity to start negotiating.

Homeowners and builders are throwing in all kinds of enticements to prospective buyers, from free plane tickets to a paid temporary lease on a car to a landscaping allowance. For buyers on the brink of surrender to that complimentary granite countertop, Money magazine offers a few rules to remember:

Make them show you the money. The incentive at the top of your list shouldn't be a short-lived luxury but a long-term comfort, which can certainly come from knowing you are getting the best possible price on the home you want. If you are thinking of getting a 30-year, 6.5% fixed-rate mortgage to finance your new home, do not settle for the new $2,500 big-screen TV that the owner is offering you free. Try instead to get the price of the house cut by that amount; that would reduce the price of a $200,000 house to $197,500 and in the long run save you $3,200 in interest payments. You could also pay less in property taxes, which are often based on a home's purchase price.

Go for the next best thing. If you can't get a lower price, consider asking the builder to cover the expenses you will incur buying the home: closing costs, homeowner association fees, even a few months' worth of mortgage payments. A developer who wants to record the highest possible price for that home may be unwilling to slash it but be open to other ideas.

Calculate the offer's true value. If the seller offers you a free upgrade, get a rough estimate of the cost of having it done yourself if you were to buy the house at a lower price. Also, ask yourself whether you would have opted for a particular incentive if you had to pay cold, hard cash for it. If it's not something you really care about, then perhaps the fact it's free doesn't mean much to you.

Watch for the gotchas. A builder will often try to steer you to an affiliated mortgage lender, with a promise to give you a discount. But you can't count on the mortgage company to give you the best deal on rates and closing costs in the first place. If the mortgage offered is not the best one you can get (try to obtain at least three good-faith estimates from other lenders), subtract the extra cost of the seller's mortgage from the value of whatever incentive is being pushed, then decide if the deal makes sense for you.

Home Affordability Calculator Yearly gross income $
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Know what's in it for the broker. Typically, sellers offer their brokers something beyond the customary 3% commission, which may naturally entice the latter to pressure you into a deal. To neutralize that bias, specify in your contract with the broker how much commission will be paid and ask that any extra money earned be applied toward paying your closing costs. You could also use an agent who represents only buyers (go to the National Association of Exclusive Buyer Agents' Web site). Exclusive buyer's agents typically pass additional incentives on to buyers in one form or another.

Keep the discussions friendly. Negotiating throw-ins can get complicated. If you expect the seller to toss in a favorite chandelier, you might jeopardize the entire deal. In dealing with individual sellers, you would be wiser to ignore incentives and focus on the price.

The bottom line: Don't let negotiations distract you from your goal of getting the home you want with a financing policy that's fair to you.