If you own a smartphone, you’ve likely been on the receiving end of a random text from someone asking to buy your house. These unsolicited text messages have inundated the real estate industry in recent years, leaving some property owners wondering if the texts are legit.
The answer to that question varies and largely depends on who sent the text.
“They come from a mix of various people,” says Cindy Wallace, a Realtor with Compass Real Estate in Nashville, Tennessee. “Some are legitimate scams. Some are wholesalers looking to buy a house for cash and resell it. Some are iBuyers.”
Even if the source is legitimate, one important question remains: Why would somebody even consider entrusting their biggest investment to an unsolicited text?
“These text messages are just modern cold calls,” Wallace says. “So from the homeowner side, it’s just about your tolerance for engaging with that type of communication.”
If you find yourself in that situation and you are interested in selling, then you’ll need to start by identifying the source.
Where Are the Unsolicited Offers to Buy Your House Coming From?
As Wallace indicated, those unsolicited offers are likely coming from three options.
If you’re getting a text message without a company associated with it — maybe from a random guy named “James” — it’s probably in your best interest to ignore it.
“If they’re not telling you a company, I would say that’s pretty illegitimate,” Wallace says.
Most of these scams are about getting as much personal information from you as possible, she says, with your house simply being the bait.
“There’s all sorts of ways people can try to get a little bit of money out of you all the way up to trying to get your house,” Wallace says.
Predatory buyers may ask for your bank account number to “wire money” or say they want to run a title search to make sure they want to buy the house. It’s similar to an email phishing scam but it involves the largest asset you own.
Once such scam is the “white knight” scam, also called a foreclosure rescue. A prospective real estate investor may offer a loan to help catch the homeowner up on payments and avoid foreclosure. In exchange for the loan, the investor asks the homeowner to “temporarily” sign over the deed.
With the property in their name, the predatory investor can now do whatever they want from leasing back the property to the original owner under unfavorable terms and monthly payments to selling the house or even beginning eviction proceedings.
If you’ve done your research and pinned down the source of the communication — whether it’s a text, phone call or even a postcard — you may feel more comfortable if the offer came from a legitimate company.
That said, while legitimate, a wholesaler isn’t necessarily working in your best interest.
“There are a lot of people investing in the real estate market because other markets are a little more volatile,” Wallace says. “So they get these big groups of real estate investors and funds and what they do is offer a cash offer quickly, make it very convenient for the seller, and then they more or less flip it.”
They also might hold on to the property and place it into their investment pool of rental housing. The catch, Wallace says, is they usually offer less than fair market value because they’re making a cash offer and getting the seller out from under the house quickly.
“A wholesaler is going to buy at a tremendously discounted rate,” Wallace says. “Sometimes they’ll even reassign the contract to make money that way, but they’re going to buy way below market value.”
If you go with an iBuyer or wholesaler, make sure you know what the fair market value of your home is, which can change very quickly, so you can make an informed decision about any offers.
iBuying is an automated, online method of selling your home quickly. If you’ve seen ads from companies like Opendoor, Redfin or Offerpad, then you’ve heard about an iBuyer. Over the last few years, the iBuying industry has exploded.
“Their goal is to put the house back on the market for the most part,” Wallace says.
For the homeowner, the draw of selling to an iBuyer is simply convenience. If you don’t want to deal with the hassle of staging, showings or the ups and downs of negotiating, you might consider iBuying. Just know that you may not get the highest price for your home and there may be hidden fees.
“They’ll pay cash. They’ll let you stay there for a little while after you sell,” says Wallace. “But they’re going to most likely buy it at a discounted rate compared to what you would get on the open market, then sell it again or offer it to their pool of buyers.”
The main question to answer when it comes to iBuyers and wholesalers: If someone is going to make money on your house, do you want it to be you or the person who buys from you and sells it again?
Bottom Line: What to Know Before Using an iBuyer or Wholesaler
Doing your due diligence with research is the most important thing you’ll ever do before putting your house on the market or selling it quickly.
Whether you’re using a traditional real estate agent, an iBuyer or selling to a wholesaler, a simple Google search and a couple of phone calls to friends or family can often help you identify legitimate options versus fraud.
Scammers aside, what do you need to know before you act on an unsolicited offer to sell?
“First, you need to know that they are selling you one thing: convenience,” Wallace says. “Their marketing pitch is that you’ll avoid the time of selling your home, the hassle of commissions and people walking through all the time. So, at the end of the day, it’s appealing to someone who might be in an urgent situation.”
These options also might make sense if your property needs a lot of costly repairs. You might be able to get a decent offer for the home while passing the burden of the updates along to the investor.
On the flip side, Wallace says homeowners typically make about 17% less through wholesaling or iBuying than they would if they put it on the market. In addition, it’s important to consider the fees — anywhere from 5% to 8% — that come with that type of sale. Plus, after inspection, the buyer might choose to knock off a few thousand here and there for an older HVAC, roof or other issues.
Depending on your circumstances, these options might work for you, simply for the convenience. But in 2022, with the hot real estate market continuing to surge across the country, homeowners should understand the amount of money they may concede by forgoing the open market.
The Traditional Option: Using a Real Estate Agent
While wholesalers and iBuyers offer convenience, hiring a real estate agent to sell your home is the most tried-and-true option in terms of value, advocacy and personal attention. A real estate agent brings specialized expertise and is ethically bound to work in your interest.
“When people call you or send you a text, they’re most likely working for someone else whether it’s an iBuyer, wholesaler or some type of fund,” Wallace says. “There are people on the other end of that text or call who have the money, and they are trying to get your house at as low of a price as possible.”
A real estate agent works from the opposite perspective — trying to sell your home for as much as possible — and usually gets paid on commission based on the sale price.
“When you have a realtor, they’re working on your behalf to get the best price for that home,” Wallace adds. “They’re making sure your goals are valued and that your best interest is at hand.”
Robert Bruce is a senior writer for The Penny Hoarder.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.