We’ve seen the We Buy Houses signs. You know, those ubiquitous signs on yard stakes and nailed to light poles that claim cash is waiting for your home.
The way the business plan works is that investors can find desperate people, called “Don’t Wanters” who they can buy their house for less than it is worth and either flip the property for a profit or rent the property for a profit.
For responsible investors, there is a perfectly legitimate role they play and they deserve the profit they can make by assisting a homeowner to get out from under a real estate dog.
This approach was especially popular in the U.S. when many mortgages were assumable and a new owner could step into the old mortgage without having to refinance.
Our friends in Australia are now experiencing a surge in the “We Buy Houses” scheme.
But the deals actually involve complex “vendor finance” agreements where a buyer agrees to move into a house and make regular payments until the agreed purchase price is paid off or they are able to secure a home loan to repay the vendor in full.
If the buyer defaults, they lose all of their repayments and have no claim over the property. – Source
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