Tell me about "We Buy Any House" companies

February 9, 2005 8:54 AM

I live in a very depressed urban area (Baltimore) where there are blocks and blocks of boarded up or burnt out houses. I see signs around town that say "We Buy Houses-Any Condition." Why are these folks buying houses? [+]
posted by OmieWise to work & money (25 comments total)

Gentrification. Wouldn't surprise me if that was the answer.
posted by drpynchon at 8:56 AM on February 9, 2005

I can think of several reasons, but all seem kind of tenuous:

1) To renovate and resell, but the neighborhoods are not good.

2) To somehow have increasing general equity in your life, but the prices are so low and the values are unlikely to increase.

3) Something to do with one of the no-money-down-and-I've-got-this-phat-yacht infomercials that I sometimes see, which is what I am most intruiged by.
posted by OmieWise at 8:57 AM on February 9, 2005

Because they are not making any more land.
posted by fixedgear at 8:57 AM on February 9, 2005

The guys who post those signs are basically real estate traders. They offer quick money without waiting for a buyer, and can therefore offer less than market value for the house. Basically they are preying on people who need to sell their house right now because of financial troubles. If they buy at low enough below market price, they can turn right around and sell the house again and make a nice profit. Even if it takes a few months, they can potentially double their money this way, if the seller is desperate enough to let the house go at half its market value. And sometimes they are.
posted by kindall at 9:02 AM on February 9, 2005

I imagine they are buying on speculation. If they get all the land and there is a boom, they'll be in a very good position to make a lot of money.
posted by synecdoche at 9:02 AM on February 9, 2005

I think the point of people saying they buy houses (esp. if they say "we pay cash!") is that they will offer you about 50% of market value. They prey on the recently widowed, people going through a money crisis, etc.

Then they hold onto it and get market value for it. It's probably a safe investment, but you're taking advantage of someone to get the cheap house off their hands.
posted by mathowie at 9:02 AM on February 9, 2005

I think it's the third option in your list, especially if the message is on those flappy plastic signs stuck into the grassy medians all over the place.

The thing that breaks my heart about the eyesore rowhouses in Baltimore is that you'll see an entire burnt-out block with one house that's different. Flowers in the window, fresh paint, swept stoop. There's still hope there, but it's so rare.
posted by kittyb at 9:08 AM on February 9, 2005

I met a guy on a plane once who was one of those "We Buy Ugly Houses" people in Arizona. He told me that it's a lucrative business. A lot of the houses are estate houses where the executor doesn't have the time or inclination to do the work to the house to get it sold. That said, I still believe that a lot of that business consists of preying upon the poor and elderly.
posted by Juicylicious at 9:21 AM on February 9, 2005

See also: foreclosure scam artists. There was a great article in the Washington City Paper last year about this guy, unfortunately you have to purchase it.

Also, as others have noted, real estate speculators.
posted by casu marzu at 9:27 AM on February 9, 2005

They aren't "preying" or "taking advantage." They provide immediate liquidity to distressed sellers, which absolutely no one did just a few years ago.
posted by trharlan at 9:32 AM on February 9, 2005

which absolutely no one did just a few years ago.

They've been around for a while. 30 years ago, my father-in-law bought a house in Camden, NJ hoping for a promised gentrification. It didn't happen, my mother-in-law got pregnant and he sold the house to one of those companies. They bought it (he got most of his money back) and promptly resold it to an aspiring slumlord who cut it into apartments.

He was very happy that the company existed because he didn't know how to sell to any aspiring slumlords and no real estate agent would put any effort into selling the place. If you own a piece of distressed property, you might have to sell it without a realtor and that's beyond the abilities of many people.

I'm not denying that the companies are often predatory, but they serve a legitimate purpose as well.
posted by Mayor Curley at 9:42 AM on February 9, 2005

Some are slumlord companies who buy damaged houses, get them up to minimum code, and rent them out under "rent to own" scams.
posted by Kellydamnit at 9:43 AM on February 9, 2005

I'm sure it's what others have said, but there may also be a highway planned through the area or some other government-bond sponsored urban renewal project. A crosstown bridge here was held up for twenty years while landowners on either side of it waited for the numbers to rise.
posted by atchafalaya at 9:53 AM on February 9, 2005

I think Mathowie is dead-on.

I think the point of people saying they buy houses (esp. if they say "we pay cash!") is that they will offer you about 50% of market value. They prey on the recently widowed, people going through a money crisis, etc.

They're advertising to people who need money quick and don't have the time or want to fix the house up to sell it.

They think "crap, this house isn't very nice, I'll never sell it!" But then they'll see a billboard saying We'll buy your house no matter how bad it is! and take advantage of it regardless of the fact that they'll get half of what they would if they spent a little time on it and sold it themselves.
posted by nitsuj at 9:56 AM on February 9, 2005

Pretty much what mathowie, kindall and kellydammit said. They have been around for years and years in Baltimore - a lot of those rowhouses are kind of up in the air: mortgage paid off, owner died, heirs in the burbs & too busy to worry about it - so they want to sell fast and quick and they don't care how much money they make.

It is not easy or sometimes even possible to sell a house in inner city Baltimore. I had one; I was unable to sell it for even half of what I paid for it ($42,000) and finally I let the bank take it back rather than taking what I was offered by the scam artists - $25,000 - which would have left me still owing. But if the mortgage is long since paid off, people may go for the scam artists. Yes, they do prey on the poor and desperate.
posted by mygothlaundry at 10:07 AM on February 9, 2005

I was unable to sell it for even half of what I paid for it ($42,000) and finally I let the bank take it back rather than taking what I was offered by the scam artists - $25,000 - which would have left me still owing.

This here is the key. A great deal of people are in the situation where any money, at all, right now, is acceptable. Even if you walk into it with your eyes open, this is hardly a prescription for social prosperity on a large scale.
posted by perianwyr at 10:21 AM on February 9, 2005

Being generally a free-marketeer, I probably shouldn't have used "preying" in my message. They're not ripping people off per se. They are morally equivalent to, say, subprime lenders. It's probably a good thing that owners of such homes can sell their houses and get anything out of them at all, rather than being stuck there and unable to sell.
posted by kindall at 10:36 AM on February 9, 2005

They are morally equivalent to, say, subprime lenders.

I agree. Nothing dubious about it, but not the most glamorous lifestyle. Like those places that offer IMMEDIATE CA$H for your paychecks, or even pawn shops.
posted by Civil_Disobedient at 10:46 AM on February 9, 2005

I also live in Baltimore. The way this works has already been described. However, the majority of boarded up buildings you are noticing, even in places experiencing a revival like Mt Vernon, Bolton Hill near Eutaw (the rest of Bolton Hill has somehow remained realtively stable), etc. are owned by the city not individuals. While there are some incredible deals, those boarded up buildings need a lot of work, far more than those that people have tried to hold onto. This scam works because they are preying on the poor. Real, responsible developers who care about Baltimore will try to buy from the city, not take advantage of its residents.
posted by Grod at 10:52 AM on February 9, 2005

I know more than a few people who do something similar to this. They buy the houses on the cheap and then repair and resell them. When I was frist looking to buy a house around 4 years ago, I looked at more than a few houses like this...shaky neighborhood but nice house / lot with a lot of updates. Biggest problem was that they wanted too much for the houses (trying to make a profit / break even I can't blame them). It was then that it dawned on me, I shouild be looking for a house that was in a bit nicer of a neighborhood, but was going too cheap because it needed a lot of work (but was still more that liveable). The local Historical / Neighboorhood society came up huge. They take federal money and repair houses and resell them for little or no profit. Sure I've put a bit of money into my house and had to do a lot of hard work, but I know that I will probably get twice what I paid for it when I'm done with it because then it will be one of the better houses in the neighborhood instead of one of the worst.
posted by Numenorian at 11:26 AM on February 9, 2005

The scam is called flipping, and it's a well-documented problem in Baltimore. Here's a recent article on the subject.
posted by TBoneMcCool at 12:03 PM on February 9, 2005

I don't think this is as bad as subprime lending. There have been numerous cases of subprime lenders being sued for deceptive practices, and I find a lot of their practices in general to be deceptive.

"Predatory" real estate buying seems like it would be fairly straightforward--we'll give you X for your house today. I don't understand how that is deceptive, it just encourages people to do something you may not think is in their best interest, but why not let them decide?
posted by grouse at 12:18 PM on February 9, 2005

Perhaps viatical settlements, another skeezy yet perfectly legal practice that is arguably useful for some, provides a suitable metaphor?
posted by nakedcodemonkey at 12:56 PM on February 9, 2005

I don't think that "flipping" in and of itself is an unethical practice. If you can do some quick renovations on a distressed property and increase its value, that's great. The problem seems to be that the practice is often tied into mortgage fraud schemes and substandard rental housing. It's an easy way for a slumlord to increase his income.
posted by mr_roboto at 2:30 PM on February 9, 2005

HomeVestors Franchise Information -- this should explain the "We buy ugly houses" thing.
posted by fourstar at 3:36 PM on February 9, 2005