‘We Buy Ugly Houses®, Explained:’ 10 Things to Know About the House Flipping Franchise
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Valerie Kalfrin Contributing AuthorCloseValerie Kalfrin Contributing Author
Valerie Kalfrin is a multiple award-winning journalist, film and fiction fan, and creative storyteller with a knack for detailed, engaging stories.
At HomeLight, our vision is a world where every real estate transaction is simple, certain, and satisfying. Therefore, we promote strict editorial integrity in each of our posts.
Famous for its ubiquitous yellow billboards along the interstate featuring a shaggy-haired caveman, HomeVestors of America — better known as the colloquial We Buy Ugly Houses® — has become a household brand in the U.S. The longtime private real estate investing franchise offers homeowners a simple deal: cash for your home in its current state, no matter how pretty it is or what underlying issues may lurk beneath the surface.
Yet despite the down-to-earth and widespread local marketing of We Buy Ugly Houses®, many people don’t know much about HomeVestors as a company beyond the 800 number they see on those roadside ads. You may wonder: Who represents “we”? And how “ugly” does a house have to be for them to buy it?
As an established player in the cash-buying space, We Buy Ugly Houses® has an interesting history, so we put together this list of fun and fast facts about the company churned up from around the web. Whether you have a dilapidated home you don’t know what to do with or love to geek out on all things real estate, this primer will fill you in on how this house-flipping franchise started, its reach today, and your options for working with companies that pay all-cash for homes in general.
1. We Buy Ugly Houses® was founded by (wait for it) a real estate agent!
Selling your house directly to a company such as HomeVestors runs opposite to the conventional listing process, whereby you partner with a real estate agent, primp and prep your house on the open market, and let buyers compete for your home. You’d never guess, then, that HomeVestors and the concept of We Buy Ugly Houses® was actually created by someone who lived and breathed the traditional way of doing real estate: a practicing Dallas and Houston real estate agent of 20 years named Ken D’Angelo.
2. It started with a late-night infomercial.
As the story goes, according to Reference For Business (known as the “Encyclopedia of Small Businesses”), D’Angelo was inspired by a late-night infomercial touting the inside track on how to buy a home — which put him in the entrepreneurial spirit. With deep knowledge of the industry thanks to his years spent working for brokerages Red Carpet Realtors and ERA Realtors, D’Angelo saw an opportunity to go where others wouldn’t in real estate, namely, straight toward those houses deemed “ugly” or unworthy of an offer.
So began the foundations of a business built on buying properties at below-market value, renovating them, and re-selling them on the open market — a process D’Angelo would master and develop training systems around that he could then pass on to others. The Texas agent founded the company in 1989 as a one-man flipping business in the Dallas-Fort Worth area. He began franchising in 1996 after raising $350,000 in a public debt offering.
3. Over 1,000 real estate investor franchisees now work under the We Buy Ugly Houses® brand, run by CEO David Hicks.
After establishing roots in Texas, We Buy Ugly Houses® then franchised in Kansas City and Atlanta as real estate investors adopted the house-flipping model under a common name in new territories. From there, the business over time went countrywide. As of 2021, We Buy Ugly Houses® has bought more than 100,000 houses and operates about 1,150 franchises in 47 states and 170 markets across the country, the company notes.
D’Angelo passed away in 2005 and was succeeded by franchising expert John Hayes through 2009. Today, David Hicks leads the company after serving HomeVestors as director of franchise systems, VP of operations, co-president, and as of 2017, CEO. Hicks developed the company’s process for coaching franchisees. Under his leadership, HomeVestors in 2020 ranked for the sixth time on the annual Inc. 5000 list of the nation’s fastest-growing private companies, based on 62% growth in revenue over three years.
D’Angelo’s legacy carries on through the continued growth of We Buy Ugly Houses®, and the company maintains its Dallas headquarters to this day.
4. HomeVestors bought fewer houses during COVID while boosting profits.
Due to COVID-19 pandemic, in 2020 HomeVestors purchased about 14% fewer houses than the previous year, but the company wasn’t alone in facing a chill on its total number of flips. National flipping trends showing that 241,630 single family homes and condos were flipped in 2020, a 13.1% drop from 2019 and the lowest recorded number of flips since 2016. The drop was reflective of a severe lack of available housing inventory across the nation.
Even so, HomeVestor franchises’ average sale price was 10% more than that of the previous year due to the unexpected housing boom that pushed home values upward. Overall, the company bought 10,000 houses in 2020, generating more than $1.6 billion in sales.
5. The shaggy-haired caveman repping We Buy Ugly Houses® has a name — and a backstory.
He wears a holey yellow tunic, sports a bushy brown beard, and is always carrying a bag of money. You may know him as the caveman on those roadside billboards, but he does have a name. We’re talking about HomeVestors’ Ug Lee, of course, who grew up “before the internet or cell phones, when communication was derived from a series of grunts and taps on the head via club,” We Buy Ugly Houses® elaborates on its website.
As it turns out, Ug Lee has a great appreciation of homes that may be a little rough around the edges from firsthand experience. Once while he was seeking shelter in the rain, he stumbled upon a pile of debris that turned out to be a spacious cave. With some TLC and sprucing up, Ug Lee was able to rehab the terrain into an inhabitable shelter, a feat that greatly impressed the rest of his tribe, aptly named the Vestoreans.
6. From ugly homes to ugly situations, HomeVestors won’t shy away from a property.
The story of Ug Lee represents HomeVestors dedication to seeing the beauty in what a home could be. Its name and slogan let sellers know that the company will embrace a home or situation that other buyers find unattractive, such as:
- Homes with roofing, foundation, plumbing, electrical, or other structural issues
- Homes located in a flood plain or other inconvenient location
- Homes with high-interest rates or mortgage payments that are too high to handle
- Homes connected with bad memories for the homeowner, such as a divorce or death
- Inherited properties that the seller may be unfamiliar with
More than 80% of the houses that the We Buy Ugly Houses® franchises purchase are less than 1,400-square feet and were built before 1980. Hicks, the CEO, recalls that the company has taken on homes with major clutter issues, including one that had pet monkeys and another with bats in the attic. The company holds an Ugliest House of the Year contest among its franchisees, who revamp these distressed properties. The 2021 winner was a 2,146-square-foot home in Knoxville, Tennessee, that originally had a condemnation order and was scheduled for demolition.
7. It took sellers time to trust the simple process of a cash, ‘as is’ sale.
“You’ll buy my house — in any condition? You aren’t going to list it?” In the early days of HomeVestors, sellers were skeptical that HomeVestors would provide an offer for their properties which in many cases were falling apart. That’s according to Mark McKellar, a former HomeVestors development agent and owner of multiple We Buy Ugly Houses® franchises, who spoke to Franchise Business Review about his experiences with the company in its earlier days.
In the beginning years of We Buy Ugly Houses®, franchisees had to build trust that their deal was legitimate — i.e, sellers didn’t have to do any work to their home, and HomeVestors would still pay them something for it.
8. We Buy Ugly Houses® will base their offer on the level of work required, among other factors.
To sell a home through We Buy Ugly Houses®, a homeowner fills out the website contact form or calls the company to connect to a franchise in their area. A representative visits the property, evaluates the condition of the home, and makes a cash offer depending on several factors, including:
- The home’s current condition
- The approximate cost of renovations and repairs
- The time anticipated for renovations and repairs
- The “post-renovation” value compared to other homes in your area
- The costs of maintaining the home until it sells (such as paying for utilities, taxes, and insurance)
- The real estate commissions required to sell the home
Many rehabbers use the flipping industry standard known as the 70% rule, where an investor offers no more than 70% of a property’s after-repair value for a house they plan to flip. They subtract any estimated repair and holding costs from that 70%.
Franchisee Ali Hasan told Austin’s Studio 512 in 2019 that they can close on a property within two weeks, which helps clients such as people who need to relocate quickly and can’t carry two mortgages.
Some offers are negotiable, though. Henry Dunn, 79, of Lauderhill, Florida, told The Miami Herald that he rejected the $225,000 offer We Buy Ugly Houses® made on his three-bedroom, two-bath home, thinking it was too low. The Miami Association of Realtors says the median sales price of single-family homes in South Florida is $450,000.
However, after a few real estate agents said the house “needed too much work,” Dunn texted the same We Buy Ugly Houses® rep with a higher counteroffer, which the franchisee accepted that same day.
9. It’s recommended to gather other estimates of your home’s value before selling to any cash buyer, including We Buy Ugly Houses®.
The “cash for your home” rehabbing business model has led to what some housing advocates call predatory tactics, particularly in gentrifying neighborhoods. In Atlanta, Georgia, for instance, wholesalers and investors in 2020 left postcards and fliers at homes in disrepair and tracked down the owners, phoning them with cash offers, American Public Media (APM) reported.
Resident Emmanuel Hall told APM that he helped sell his stepfather’s home a few years ago to We Buy Ugly Houses® for $17,600 after his family received about a dozen fliers in the mail. The offer was less than what the family paid for the purchase in the 1970s.
We Buy Ugly Houses™ resold the home months later for $100,000 to another investor, who then renovated it and sold it again for $300,000. Hicks, the company’s CEO, shared photos of the roof damage with APM and said We Buy Ugly Houses® had to repair the home before it could sell it to an investor for a full renovation.
Some cities such as Chicago, Illinois, have passed laws prohibiting investors from calling for six months after homeowners turn down their offers. In Atlanta, meanwhile, city officials and community groups hosted workshops and urged residents to investigate what their homes were worth before selling.
“I think at the end of the day at least making sure people know what their houses [are] generally worth is the most important step,” Georgia State professor Dan Immergluck told APM. He suggested that the city add a requirement to the home-selling process where homeowners would receive estimates of their home’s value before closing, similar to how other cities mandate home inspections.
Before you accept any cash offer, investigate what your home is worth through a comparative market analysis (CMA), which many real estate agents offer for free. If you’d like to connect with a top real estate agent experienced in putting together CMAs that objectively show you what your house is worth, HomeLight would be happy to connect you.
10. We Buy Ugly Houses® isn’t the only route to a quick and low-hassle sale.
HomeVestors has carved its place as a major franchise offering continuity among real estate investors who purchase homes under the We Buy Ugly Houses® brand. That said, the company isn’t the only means of selling your home for cash, nor are ugly homes the only properties that investors in general may be interested in.
HomeLight developed our Simple Sale option for home-sellers knowing that the conveniences of cash offer appeal to an array of sellers, whether they aren’t comfortable showing their home while it’s on the market or need to relocate quickly for a new job in another city. Through Simple Sale, HomeLight works to match you with an investor in your area who can make a full cash offer on your property so that you can sell your home on your timeline, in as few as 10 days or whenever you’re ready. The cash offer you receive will be competitive, with no hidden fees or agent commission costs involved.
Similar to selling with We Buy Ugly Houses®, with HomeLight Simple Sale, you can skip the repairs, prepwork, and open houses and go straight to receiving an offer for your house “as is.”
However, the Simple Sale platform can also provide offers for people with houses in fair or even great condition who are looking for a fast sale. To help you make sure you’re receiving a top offer for your home, we’ll compare your Simple Sale cash offer against an estimation of what you could realistically fetch on the open market with the help of a top real estate agent, so you can make an informed decision while weighing your selling priorities.
Header Image Source: (Jim Lukach / Flickr via Creative Commons Legal Code)