You’ve probably seen their online ads, or their fliers, or even the signs nailed to utility poles around town: “We Buy Ugly Houses,” followed by a phone number.
But what is “We Buy Ugly Houses”? Is it a scam?
And if it’s legitimate, how much does this company actually pay for your house?
For the most part, “We Buy Ugly Houses” is not a scam; the legitimate operators doing business under the “We Buy Ugly Houses” brand name are cash buyers who, yes, buy ugly houses.
The catch is that they won’t pay anything close to fair market value — that’s the tradeoff for a fast, easy sale. Some reports say that “We Buy Ugly Houses” can pay as little as 50% of a property’s fair market value. That’s a steep price to pay for convenience.
If you want to get the most possible money when you sell your home, you should compare all of your options. Our friends at Clever can connect you with an agent who will work for you for a flat fee of $3,000, or just 1% if your home sells for more than $350,000.
What Is “We Buy Ugly Houses” and How Does It Work?
The We Buy Ugly Houses business model is very simple:
- They seek out distressed owners with undervalued properties in subpar condition (“ugly houses”)
- Offer quick cash payment at below-market prices
- Then quickly renovate and flip the properties or rent them out
We Buy Ugly Houses can be a viable option for a few very specific categories of sellers who:
- Are under extreme time pressure because of divorce
- Have had a death in the family need to move to a new location
- Have inherited a property that’s in disrepair
There are very few properties, no matter how poor the condition, that they won’t purchase.
Independently Operated Franchises
“We Buy Ugly Houses” is a cash buyer brand owned by Homevestors. They license the name out to franchisees, who work locally as independent operators.
So while each “We Buy Ugly Houses” franchisee has been trained by the parent company, they work without any oversight or guidance. This makes it doubly important for you to check the reviews and references for any “We Buy Ugly Houses” buyer you’re thinking of working with, as seller experiences can vary wildly between different franchisees.
The Sale Process
The sale process through “We Buy Ugly Houses” usually unfolds like this:
- The seller contacts their local “We Buy Ugly Houses” franchisee through the internet, or over the phone. The seller will typically be asked to give basic information about the property, such as location, age, condition, square footage, etc.
- The buyer will view the property, often within 24 hours. After inspecting the property, they’ll make a cash offer. This offer is usually non-negotiable—in other words, it’s a “take it or leave it” offer.
- If the seller decides to accept this offer, they’ll sign a purchase agreement and choose a closing date. Cash buyers like “We Buy Ugly Houses” can offer much more flexibility on closing dates than traditional buyers, since there’s no financing involved. This is why these types of cash buyers are popular with people under external time constraints.
- The seller can conclude the deal, cash in hand, in as little as two to five weeks.
How Much We Buy Ugly Houses Offers: The 70% Rule
While there are anecdotal reports of “We Buy Ugly Houses” offering as little as 50% of a home’s market value, there’s no hard-and-fast rule about how much they tend to offer, especially when you consider that every franchisee is independent. But it seems that the “We Buy Ugly Houses” business model adheres to a well-known rule in the house flipping circles: the 70% rule.
The 70% rule works like this: for a buyer to reliably turn a profit on a property, they should pay no more than 70% of the house’s after repair value, or ARV, minus the cost of repairs and renovations.
So let’s say your home, after $30,000 in extensive renovations, could bring as much as $180,000 on the market. A buyer following the 70% rule would offer no more than $96,000 for your home.
Here’s what the equation breaks down to:
($180,000 x 0.70) – $30,000 for repairs = $96,000
When we say that the convenience of selling to cash buyers like “We Buy Ugly Houses” has a steep price, we mean that literally. If you paid $30,000 out of pocket to bring your property into market-ready shape and sold for $180,000, you’d still come out ahead.
With typical seller closing costs of 3%, and realtor commissions of 6%, your net profit would be approximately $134,000. That’s almost $38,000 more than We Buy Ugly Houses would have paid you, despite traditional sale costs.
Of course, if you don’t have the money on hand to pay for repairs up front, or if your home’s drawbacks are due to factors beyond your control, like location, a cash buyer could be exactly what you need.
Keep in mind that 70% is the theoretical maximum they can pay you and still make a profit, meaning that if they can persuade you to take 60% or even 50% of the ARV, they’ll make even more money off the transaction. And many reviews of “We Buy Ugly Houses,” which we’ll delve into in more detail below, describe them using high pressure tactics to persuade sellers to take extremely low offers, often after understating the property’s actual market value.
“We Buy Ugly Houses” Pros and Cons
When you look objectively at the “We Buy Ugly Houses” business model, it’s clear there are some well-defined upsides for sellers, as well as some significant downsides. Let’s look at some of the specific pros and cons.
A fast transaction
Everything happens at warp speed when you deal with “We Buy Ugly Houses.” A representative will inspect your property within a day or two of first contact, and often make a cash offer on the spot. Once you accept the offer, you can close in as little as two weeks. That’s a huge difference from the traditional sale process which, even in the best case scenario, takes at least two months.
Unless you have a property that has wide appeal, you’re going to go into a traditional sale with more questions than answers. How long will it take to find a buyer? Will you find a buyer at all? Will you get above or below your asking price? Will you be able to close before the end of the year, or will the process drag out for months?
With “We Buy Ugly Houses,” almost all those questions are resolved. As their name implies, there are very few properties, if any, that they won’t buy. And when they do buy, it happens quickly, with very little negotiation or back-and-forth.
Fewer associated costs
Selling a home the traditional way incurs a lot of costs; besides the 6% real estate commission, there’s closing costs that can bring the total costs up to 10%. So with a traditional sale, you actually end up pocketing much less than the final sale price.
With “We Buy Ugly Houses,” the seller doesn’t have to try and negotiate a lower commission or reduce closing costs, because there aren’t any – although keep in mind that this is one of the factors that keep “We Buy Ugly Houses” cash offers so far under market value.
Bringing a dilapidated property to market requires a lot of repairs and renovations before it’s ready to be seen by buyers. That costs time and money. But selling to a cash buyer like “We Buy Ugly Houses” means they’ll take it off your hands as is. If you’re looking for a fast transaction, with no upfront out-of-pocket costs, this is the way to go.
It’s well known that “We Buy Ugly Houses” extends offers that are far below market value. Part of that is because they’re often buying homes that require repairs and renovations before they can be resold.
But part of it is simply built into their business model. They know that many sellers who contact them are under external pressures, and will take a very low offer just to get the sale done. And since every dollar below market value they can avoid paying out is a dollar of profit, they’ll make the lowest offer possible—often as low as 50% below fair market value.
As you’ll see in the next section, where we examine some real online reviews of “We Buy Ugly Houses,” some franchisees use high pressure tactics to push sellers into accepting extremely low offers. While this probably isn’t Homevestors company policy, there are many examples of individual franchisees using unsavory and borderline unethical tactics.
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We Buy Ugly Houses has franchise offices in 46 states, with multiple locations in many counties or cities.
“We Buy Ugly Houses” Reviews: the Good and Bad
A survey of online reviews of “We Buy Ugly Houses” reveals some recurring themes— sellers who aren’t much concerned with profit, and just want to unload the property end up fairly satisfied with their experience, while sellers who prioritize a fair, profitable deal often have complaints.
Let’s look at some representative samples.
A Home In Disrepair Sells Quickly
On the other hand, this seller had a home with a defective roof, which is a very expensive home repair. They were able to sell the home, as is, to “We Buy Ugly Houses” for cash, and came away from the experience fully satisfied.
A Quick Sale Following a Death in the Family
As in the review above, this seller prioritized speed and ease over maximum profit. They’d inherited the house after a death in the family, and just wanted to unload it, regardless of price. Under these circumstances, “We Buy Ugly Houses” gave them exactly what they were looking for.
An Extreme Lowball Offer Exposed
This seller was fairly motivated to sell, but passed up an insultingly low offer from Homevestors. Three months later, they were able to sell the property for three times what Homevestors offered. The seller echoes the advice we dispensed above: always get multiple offers from multiple buyers.
Another Lowball Offer— and Unsavory Pressure Tactics
This seller tells an appalling story of Homevestors representatives seemingly trying to manipulate the seller’s expectations, making insulting remarks to the seller’s face, and then extending an extremely under-market offer. Just a year and a half later, the seller was able to sell for 6 times what Homevestors offered.
“We Buy Ugly Houses” Scams and Lawsuits
Independent contractors operating under the Homevestors-owned “We Buy Ugly Houses” brand are legitimate cash buyers. But because the company caters to the desperate and highly-motivated, dangles fast, all-cash offers, and advertises with signs nailed to telephone poles next to freeway off-ramps, they’ve created a market that’s ripe for exploitation. And as the “We Buy Ugly Houses” brand has become more widely known, scams have proliferated in its wake.
So how do you know if the cash buyer you’re dealing with is legitimate? A good rule of thumb: the money should only move in one direction in a home sale – and that’s towards you, the seller. If your buyer asks you for money for “processing fees” or anything else, that’s a sign that you’re probably being ripped off.
Another common scam is for a cash buyer to make you an offer on your home, have you sign a contract agreeing to that price, and then stall while they try to sell that contract to another investor at a profit.
This is called “wholesaling,” and can be a legitimate way to conduct business, as a middleman between sellers and investors, but it shouldn’t be done on the sly. If you sell to a cash buyer, make sure there’s a clause in the sales contract stating that they’re not allowed to “reassign” the contract – otherwise you could be in for a long, frustrating wait as they try to flip your contract for enough cash to pay both you and themselves.
To avoid scams like these, always ask the cash buyer for multiple references. If they can’t provide them, or if the references you contact don’t seem legit, look for a different buyer.
A We Buy Ugly Houses Ponzi Scheme
The real “We Buy Ugly Houses” brand has also received some criticism for its business practices. Even if you deal with a genuine “We Buy Ugly Houses” operator, you could still be in for some ethically murky treatment.
One well-publicized example involved a “We Buy Ugly Houses” franchisee from Colorado who ran a ponzi scheme, buying a series of properties at below market value, with promises of big resale profits, only to use the sale proceeds to pay off previous sellers and investors. This woman—who, to be fair, committed some of her $14.5 million fraud while working for a company that was not affiliated with “We Buy Ugly Houses”—was eventually sentenced to eight years in federal prison.
It bears repeating—if you do decide to sell with “We Buy Ugly Houses,” ask your local franchisee for references, and read all the online reviews you can find, to make sure they operate in a legitimate manner.
Alternatives to “We Buy Ugly Houses” Cash Buyers
“We Buy Ugly Houses” fills a legitimate niche for sellers. If you want to sell a property quickly and frictionlessly, and you aren’t concerned with making the most money possible from the sale, they can be a viable option.
However, because of the market they cater to, fraud is a real risk, so make sure you do your research, check references, and get multiple offers.
You should also look at alternative options for selling your home, like:
- Selling FSBO
- Selling to an iBuyer
- Selling with the help of a real estate agent
In a for sale by owner (FSBO) sale, the owner of the house does all of the marketing and negotiating themselves. While this can help you avoid realtor commissions and might net you more money than a cash buyer, it has its drawbacks.
The average listing with an agent sells for almost $80,000 more than a for sale by owner (FSBO) listing. It may take slightly longer, but your increased profits will more than offset the seller closing costs and commission you’ll be paying out— especially if you use an agent who’s agreed to work for a reduced commission.
Sell to An iBuyer
iBuyers make instant offers on houses and can close in as little as a week. iBuyers don’t pay fair market value for homes, but their offer is likely to be more reasonable than a company like We Buy Ugly Houses.
But, while iBuyers pay all cash and can close quickly, they generally have much stricter criteria for houses.
For example, iBuyers usually don’t buy houses that were built before 1950, or houses that are in need of significant repairs.
If you’d like to try selling to your home an iBuyer, contact Opendoor today to request a free, no-obligation offer.
Sell With The Help of an Agent
Selling the traditional way, with either a 3% or a discount agent, will almost always bring in more money.
We’ve partnered with Clever Real Estate to help our audience connect with top local agents who’ve already agreed to provide a full-service, top flight sale experience for a flat fee of $3,000, or 1% if your home sells for more than $350,000. If you’re considering going with a cash buyer like “We Buy Ugly Houses,” you owe it to yourself to at least seek out a free consultation.
Find out what a Clever agent can do for you that “We Buy Ugly Houses” can’t.
Sell Your Home Quickly and Save Money With a Top-Rated Agent
Clever Real Estate is the best alternative to “We Buy Ugly Houses.” Learn how top-rated agents sell your house FAST at a discount.