Quote:
Originally Posted by retiredguy123
I agree that a cash offer is not appropriate immediately after someone dies.
Note that, in some real estate markets, especially where younger people have active careers, they are turned off by the 3 to 6 month house selling process. Some large companies are filling a need by making cash offers with an immediate closing. These are not scammers. The process allows the seller to unload the house and move to another job quickly. I doubt that the brokers like the process.
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Often, these are small companies given access to a large amount of credit by bigger companies. The small companies specialize in finding and contacting people who might be interested in moving and offering them cash in exchange for skipping the entire sales process and 6% paid to realtors. Some of them make a low-ball offer, but some make a pretty fair offer. These small companies tend to immediately turn the houses over to bigger companies, repaying the loan they received and keeping part of it. These larger companies then bundle house sales from all over the country and sell them to REITs. (Real Estate Investment Trusts) Investors buy into these REITs. The investors don’t own the houses. They just own shares. These are also sold like mutual funds. Some years they are the best investments on Wall Street. Some years they tank.
At some point the homes are reconditioned and perhaps sold for a good profit but more likely rented out. The huge companies doing this use computer algorithms to figure out the absolute maximum the market will bear for each house in its neighborhood and charge it. That is how REITs make their money, mostly from rents. However, when one of these companies starts renting out a house, the top dollar it charges is discovered by other companies in the area that rent out homes and duplicated. The result is that these companies bear the primary responsibility for the huge increase in the cost of rent around the country. As local owners raise rents, that money goes into the pockets of the local companies and out of the pockets of the millions who have to rent homes and apartments. However, the companies that own thousands of homes and hundreds of thousands of homes and raise the rent every year are doing it for investors.