Home sale to fast-cash 'rehabber' OK for some Real Estate Adviser by Steve McLinden • Bankrate.com

Dear Real Estate Adviser,
Is it a good idea to sell your house through a "fast cash for your house" agency? I ask because my home requires a lot of repair work. How do they operate? Are they on the up and up?
-- Fast Eddie

Dear Eddie,
These services have a legitimate niche in the industry, especially for distressed or time-constrained sellers. They are not unlike other rehab-and-resell businesses, in that they try to buy well below market value and resell at market value.

The vast majority of such companies are "on the up and up," although there are a handful of unsavory ones who prey on the desperate or unwitting by offering them only the equity in their homes and nothing remotely close to market value.

The only knock on the better-known national and regional chains is that their home purchases too often are converted into rental units, which reduces the percentage of resident-owners in areas where residents are trying to maintain neighborhood integrity. In that respect, however, they are not unlike other home investors and "rehabbers."

If you plan on selling to one of these companies, be prepared to discount your home significantly. While these firms are slow to offer up trade secrets, business stories in recent years indicate that such house investors pay between 10 percent and 35 percent of what a house would fetch if it were in excellent condition. As a rule, nicer homes in good neighborhoods will yield more, and beat-up homes in bad neighborhoods will yield less.

Sellers who have the time, energy and wherewithal to fix up their places themselves and sell directly to buyers through an agent or by FSBO, or for sale by owner, will likely fare much better on sale price.

But many homeowners, for any variety of reasons, don't want to endure that process. There are many reasons behind an attempt for a quick sale.

Reasons that owners attempt a quick sale:

• Need to relocate quickly, but the condition of their home negates a fast sale. • Going through an unpleasant family breakup and want out quickly. • Facing foreclosure and willing to sell at any price to maintain credit standing. • Have inherited the property and want to cash out quickly. • Have committed to another home purchase -- or have already closed -- and cannot meet two mortgage payments .

And there are some advantages to going this route.

Advantages of a 'fast-cash' sale:

• No real estate commission to pay. • No appraisal and lower closing costs. • No expenses for fixing large and minor problems that come up at the last minute to placate fickle or demanding buyers. Most of these deals are "as is, where is." • No fear that the buyer of your home will default on the purchase, thereby ruining your plans and perhaps even forcing you to default on the purchase of your next home. Even well-intentioned buyers fail to close -- often due to a similar failure on the part of the buyers of their home, to close on time, producing a domino effect of failed closings. • A quick closing for cash, as well as some or all closing costs. (Of course, you'll have to pay off your note with the sale proceeds.)

When these buyers take over a house, they will typically add new carpets and paint, fix holes in the wall and make other cosmetic touches. But they might also have to upgrade electrical and heating/air-conditioning systems and do other major fixes to make the place palatable to a renter or another buyer. Obviously, the more they have to do, the lower their offer will be to you.

So if you've got an as-is home that you want to move fast, then "fast-cash" is something you might consider. But make sure you research the company thoroughly and run a Better Business Bureau search on them before signing on the dotted line.

Good luck on your sale.

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