Commentary • March 1, 2024

What’s Up With All Those “We Will Pay You Cash for Your House” Signs on Street Corners?

If you’ve ever wondered what the story is behind those flimsy looking signs nailed to telephone poles all over the place promising you a fast cash sale on your house, I have the answer.

I’m sure you know the signs I speak of. They are known in the industry as “bandit signs.” Some are professionally printed, others look like they were hand written with an oversized marker. They are meant to get attention, and they do work. It does seem strange, however, that someone with the means to write you a check for your house would be running around planting these signs on road sides and nailing them to poles. Decidedly not glamorous.

The people who have them posted are typically known as “wholesalers,” and they are more like middle men than the end buyer. The business model is to make the home seller an offer for less than market value, and then assign the contract to a real investor for a markup, which is where the wholesaler makes their profit.

For example, let’s say you are in financial difficulty or facing foreclosure and you see the sign at a red light. You call, and the “investor” comes to take a look at the property. Let’s pre-suppose that your home is worth $500,000 “as is” and maybe $580,000 with some renovations, like new bathrooms and a kitchen. The wholesaler makes you an offer for $375,000 with a fast, “as is” close, and then they work on assigning the contract to an investor, but the investor is quoted $385,000. That $10,000 is how the wholesaler makes their money.

How do I know this? I’ve met many of the wholesalers in this market. I called a few of them, but most of the time they call me, because we have an investment group that buys houses.

The practice is legal for non-licensees but as an agent I would not engage in it. The wholesaling model is no different than buying something at a thrift shop and selling it for a profit on eBay. “Buy low, sell high” is not a new idea. If you ask me if the people who engage in the model are advisable to deal with, my answer would be that it depends. Some of them are fine. Some of them are slimy. I’ve been exposed to both. There is a concern voiced by some that there is potential for abuse here- an elderly person who might have no reason to sell for less than market value might think that $375,000 is awesome because they bought the place 50 years ago for $65,000. I would agree that such an arrangement is exploitation.

Why don’t I do it? The model is dangerously close to selling what’s called a “net listing” in New York, which is prohibited for licensees. But if the question is more broad, like would I offer that little old lady $375,000, my answer would be no. But that’s a far deeper dive for another post. But for today, now you know what those bandit signs are all about.