Live from the KC Property Guys and KC Pier Studio in beautiful Kansas City. Home to over 200 fountains and more barbecue restaurants per capita than anywhere in the nation. It’s the Kansas City Real Estate Industry Leader Show, a show about industry leaders from the local Kansas City metro market for Kansas City real estate related professionals and enthusiasts like you. Today we are discussing the questions you should ask before selling your home to a cash buyer. And now, here’s your host, Eric Scheele.
John Lindquist:
Hello everyone and welcome to the Kansas City Real Estate Industry Leaders podcast. I’m your host, John Lindquist. And with me, I have Eric Scheele. Today we’re going to be talking about cash buy or buying homes for cash or companies that do that.
Eric Scheele:
Yeah well, it’s, it’s our wheelhouse. We’re KC Property Guys and so we’re going to talk about the industry specifically from a new, intrigued, I guess, lead or an interested buyer. And you have that perspective, right?
John Lindquist:
Right. I am a homeowner and I’m putting myself in the shoes of somebody who is trying to sell their home for cash.
Eric Scheele:
And you’ve come up with some questions which are really spot on questions because they’re questions I hear a lot because this industry is so new that people are discovering it, intrigued about it, wondering about it. And so these questions are, oh, how’s this thing even work? And then it leads to multiples of questions, but our lists that we’re going to go over are things that we hear on day in, day out. I think it’d be great for homeowners who are considering a cash buy or a non traditional real estate transaction or maybe even a creative real estate solution. And so these are the things that we’re covering. I’m excited about it. I think we’ll get a lot out of it.
John Lindquist:
Let’s get right into it then.
Eric Scheele:
Yeah. You bet.
What Does Cash Buy Actually Mean?
John Lindquist:
The first question that I have for you is, what does cash buy actually mean?
Eric Scheele:
Yeah. Now it can mean multiple things, but at the end of the day, it’s supposed to mean in it’s true traditional form is that you are looking for a cash option. It happens in traditional real estate where even through realtors, people buy homes for cash. Not everything is a loan or in any form of lending. There are cash buys out there. But specifically when you’re going to a cash buyer, you’re looking for a cash solution. A solution that tends to mean that you’re going to accept the house as is in its current condition, regardless of situation. And you’re probably, not always, but probably looking for some type of quicker close, meaning that you have a time, or at least have a timeline or a life plan that needs to have a set closing date.
Eric Scheele:
A lot of people that enter the traditional real estate market, you don’t know when that house is going to go under contract. You don’t know when it’s going to sell. You don’t know if it’s actually going to get through the Kansas City home inspectors and the showings and everything else that goes with an actual offer, but with a cash buy, you can plan. And that’s ultimately what a cash buy means or working with a cash home buyers that you are looking for a solution that essentially we talk about this a lot, is the easy button. You want to set that easy button out there. Let’s take 15 minutes. Let’s walk through the house and let’s call that all the inspection that you’re ever going to need. You’re going to deal with someone who’s reputable, hopefully. And at the end of the day, when you ultimately agree to that price as a cash buy, that’s what you can plan on, on the date that you guys agree to close. That’s what I think people are looking for and that’s ultimately who we are at KC
Property Guys.
John Lindquist:
Right. Going back to a point you mentioned earlier was the situations in which somebody would want to do a cash buy option. Let’s say, hypothetically, my spouse had a job offer in a different state and we had a hard start time and so we needed to be out and in that state by that time. That would be a perfect situation for a cash buy.
Eric Scheele:
Super common. Job changes and a lot of people think of the cash buying experience as kind of the we buy ugly homes. And I’ll put the plug in there for them real quick, but simply because historically it’s always been that ugly house or that really deferred maintenance house that ultimately needs to kind of move for whether it’s a job loss or a new job or a transition or an estate home or anything else tied to it. But it doesn’t necessarily have to be that way. We deal with houses that are in the three, four, $500,000 price range. It’s not uncommon. We recently purchased a home that was in the $600,000 range. Things happen and things are evolving and changing to the point where people are looking at options from all levels of homes.
Eric Scheele:
Your situation that you talk about in terms of a job change is not uncommon. There’s also health issues. And I just bought a house in Leavenworth County yesterday, where a husband and wife who had lived in the house for 20 years were ultimately just trying to get closer to the kids. Their transition now, they’re downsizing. And if you go to kcpropertyguys.com, you’ll see what we call kind of our pillar pages that have different reasons and scenarios of which people might consider cash buys. And so all of those, course life just happens. And good or bad, life just happens. And so you have those divorce situations and health issues and things that ultimately force and need a solution, sometimes a quick solution, but it doesn’t necessarily have to be that way.
Eric Scheele:
We’re getting more and more calls from people that are just like, “I’m hearing about this and let’s just try it. I want to call this guy and he happens to be reputable and so let’s talk to him. Let’s see what this cash buy solution is all about.” It could just be out of curiosity and doesn’t necessarily have to have a reason tied behind it. It’s because you’re looking for something that’s nontraditional. You don’t want to, especially in the COVID environment, you don’t want to put up with the showings. You don’t want people entering your house. You don’t know what germs are walking through the door and so you want to be able to limit that and control that. And the way to do do that is find a reputable cash buyer and at least have a conversation.
John Lindquist:
And I’m just thinking of this off the top of my head, but I could also see being from the perspective of a traditional buyer, not wanting to go out during COVID. There’s not going to be as many buyers potentially.
Eric Scheele:
Potentially. Now this environment is slightly different because if you look at the MLS, inventory is down, happens to be down 49% same time last year. Rates are at an all time low so you get this plethora of buyers who are well qualified and still working on the essential side and you have this issue of low inventory because people aren’t searching and trying to move in the COVID environment. And so you almost have this a kind of, well, it’s a massive sellers market right now just simply because of supply and demand itself. But there are times where yeah, buyers are just skittish and looking for solutions and ultimately those types of solutions may come through a cash buyer. We get calls from buyers. Not necessarily because they’re looking for a house to get rid of, but they’re looking for a house in an alternative way because the inventory is so low. And so we get calls saying, “Hey, what do you have in your inventory? I’m a buyer. This is what I’m looking for. If you come across anything give us a call.”
John Lindquist:
That’s interesting. Yeah, that’s interesting.
Eric Scheele:
It happens almost weekly.
How Do You Assess the Value of My Home as a Potential Seller?
John Lindquist:
The next question that I have for you is, how do you assess the value of my home as a potential seller? And what metrics do you use to come up with that number?
Eric Scheele:
Yeah, yeah, absolutely. For us, KC Property Guys, we run four crews. We also have four realtors because of the volumes that we do, those are part of our demands and needs of business. And we also have obviously KC Pier Foundation Company. And so we can look at a house from multiple perspectives, specifically to keep the crews busy, to ultimately hand off to the realtors and potentially if it has foundation issues, we can get them involved with KC Pier. But we basically have to gather the data which we do for the valuation of the house through the retailers and the realtor databases and ultimately create a valuation of what that house would sell for at it’s remodeled condition. It’s after remodel condition. And then we also look at the deferred maintenance of what it’s going to take to get it there. Back off all those numbers, take a look at the cost of those and then try to find that happy medium at which everybody’s happy. And be able to rationalize it in a way that the homeowner understands.
Eric Scheele:
Typically we get the call because it needs deferred maintenance so they understand that piece of it. But for us, being transparent about those cost, what it’s actually going to be to move that house in the end. We’re going to take that away from them and ultimately take on that burden and risk of investment. And that comes within the profit margin, that risk, and then find an agreeable price is ultimately how we come to that term. We tend to listen to, I guess, in a way I always ask, I say, “Okay, well, what do you want?” If I can make it happen, I’ll make it happen. But if I can’t, I’ll be sure to tell them why.
John Lindquist:
We’ll speaking of risk, do you buy the house as is?
Eric Scheele:
Yeah. Yeah. It’s a 15 minute tour. We take the nickel tour. That’s what I tell everybody, let’s take the nickel tour. I don’t do any valuations over the phone. It’s all personalized. And you show me what you know about the house and I’ll assess that deferred maintenance and things that are needed to ultimately bring it up to a standard of which we want our buyers to come in and purchase the home. And then after that, the assumption through that tour is made. It’s done. And so that is it. And I tell people this lot, if you literally want to sell a house in 15 minutes, you’re going to have the opportunity to do so because you will. And we’ll tour it, we’ll assess the valuation and we’ll create that offer for you.
John Lindquist:
Is your home buying company owned and operated by a general contractor then?
Eric Scheele:
Well, it’s me, KC Property Guys. We are a general class A contractor licensed through Johnson County for both Property Guys and Pier. And so yes, indirectly. You deal with, at the end of the day when you’re calling KC Property Guys, you’re most likely talking to me. You’re dealing with me. More importantly, and I think we’re going to touch upon this, you’re going to close with me at the closing table. That does not always happen in this industry. In fact, rarely does it. It’s more the exception than the rule. And so there’s some seller beware types of things that you have to kind of look out for. But no, it’s KC Property Guys all the way through the transaction. We rehab the property with our crews. We ultimately sell the property with KC PG Realty Group, our realtors and then ultimately get it ready for that next family after closing.
John Lindquist:
Well, speaking of that genuine connection when you’re sitting at the same table with them closing, how do you know when a cash buyer, not necessarily yourself obviously, is less genuine?
Eric Scheele:
People are people. Do your research for one, obviously. And most people do this. Most people do this and the reason for that is you’re dealing with someone’s most likely largest personal investment in their lifetime, a home. And so they tend to do their homework behind who they’re going to hand off and transact that investment with. It doesn’t always happen, but I strongly encourage that you let your fingers do the walking and talking. Let Google will be your guide and do some research and read the reviews and ask for references. But in this industry, there are what I kind of consider some bottom feeding techniques that I don’t necessarily, I definitely don’t adhere to and don’t necessarily recommend.
Eric Scheele:
And so I just tend to kind of walk a much straighter line, much purer line, much more transparent line and kind of show that out there with our videos, our podcasts and things we take in the field and dealing with homeowners and just a very genuine way. And being transparent with my numbers, my offers so they understand what I’m going through and what we’re looking for. And basically at the end of the day, it’s a solution that we’re trying to find that happy place. You find the happy place, I’ll find the happy place, we both agreed to it. Let’s hit the button and move forward.
John Lindquist:
When you’re doing that research and you’re trying to find out if the company that you could potentially be working with is genuine and is going to treat you fairly, what sort of red flags would you be looking for then?
Eric Scheele:
Yeah, that’s hard to tell. What I encourage everybody to do is for Property Guys, I can only speak from our sake, is ask for references. You can call any of our customers. Take a look at the Google and the reviews. They’re genuine reviews. They’re not made up reviews. They actually mentioned Eric and Cheryl and the crews and the realtors involved. And so you can see that. And I think when people deal with me face to face, one on one, they see that as well. And I’m just the type of person that says what he does and does what he says and handshake is good, but we’re also going to put it in contract. We’re going to deal with a reputable title company. We’re not going to do any quick claim deeds or creative paperwork agreements.
Eric Scheele:
We’re truly going to do a cash transaction where I don’t handle the cash. I give the cash to the title company. They’re warranted and guaranteed to get the title over to me and the cash over to you in a way that you desire, whether it be a wire or a cashier’s check. And so you work with professionals that handle the transaction in a professional manner. And in the end, you hopefully accumulate some reviews where people can tell that story and ultimately kind of speak to other people who are considering this cash buy or solutions related to it.
Is Your Business a Member of any Professional Associations?
John Lindquist:
Is your business a member of any professional associations? And if so, what are they?
Eric Scheele:
Well, we’re a general contractor, obviously through Johnson County and then BBB. I guess that’s one. There’s really no, and that’s one of the problems with maybe the cash buying industry. There’s not a lot of local state regulations tied to the cash buy industry at all. And so we put our reputation on the line through Google and reviews and we are also a member of the BBB so we have that to actually fall back on as well.
John Lindquist:
With the idea of there not being very much regulation with cash buy, that’s where maybe some of the stigma would come that cash buy could be a scam, depending on who you’re working with.
Eric Scheele:
And unfortunately it’s well earned. How many times have I dealt with a customer? And we do 40, 50, sometimes 60 houses a year on a really busy year. Last year, I think we were 52 or so. But how many? It’s been proven. How many times have I sat with a person, obviously gone through our spiel and worked out options and agreements and things of that nature and they end up going in a different direction? And I try to educate people as much as I can about the industry so they understand what they’re getting into. And then three, four weeks later, I get the call back and it fell through for a plethora of reasons. And if you have three investors come and walk through your house, there’s a good chance that one, maybe even two of those are trying to buy the house with someone else’s money, not your own and doing so, they’re basically putting you under contract to ultimately thinking on their back end they can sell that contract, wholesale that contract to somebody else.
Eric Scheele:
And so to the seller, it appears as if you’re dealing with a company, but ultimately at the closing table, that contract has been sold and shuffled almost like mortgages, getting shuffled. You’ve seen that before from one bank to the next and then you get notified that that note has been sold. Similar types of situations can happen. And if that buyer cannot find that backend buyer behind him and they don’t have the cash reserves to ultimately come to the closing table, they’re going to find a way to exit out. And that’s my big fear in working with people, especially when, just this morning, I was dealing with a lady who’s in from Seattle. She’s moving her mom back to Seattle. This is all happening within a time period of 30 days. If they were to find somebody like that and then ultimately he backs out, she’s going to be in Seattle, mom’s going to be in Seattle and they’re going to be back to square zero.
Eric Scheele:
That type of stuff is what kind of drives me sometimes, especially for those people in those situations. The last thing I want to see, that I would want to go through in transitioning my mom, arranging the movers, most likely coordinating an estate sale. Everything that goes along with a big transition, especially cross the country, is to deal with something that you thought at the very beginning was well taken care of and it’s not. And so that is something that people will see when they deal with a cash investor, actually more often than not. Truly a true cash investor, who is going to agree to you, come to the closing table, ultimately work on the house is more the exception than the rule. And so those are the types of things that tend to drive me, especially when I’m working with those people.
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John Lindquist:
Let’s pretend that me and you have been negotiating the cash buy price of my home and I’ve ultimately come to the decision that a straight across cash buy is not a good option for me. What other options would there be?
Eric Scheele:
Yeah. That’s you look at kcpropertyguys.com, you get into the creative real estate solutions. There’s a reason why we’ve kind of added that tagline over the years is because after working with so many people and so many different life scenarios, with so many different situations and variables, where cash buys it is the easy button and that’s the value of the transaction. It’s easy, but it’s also the lowest equity option. And I tell people that all the time. If you really want to maximize the value, going through a cash buyer is probably not the way to go, but it is easy and it has its real strengths and benefits. You can name your closing date. You can negotiate the contract price within reason, typically. You have the ability to avoid all the showings, coordinations, keeping the house clean.
Eric Scheele:
If you get a contract, coordinating and getting in and surviving the inspection period, renegotiating that house again, getting to the closing table, hoping their lender comes through. You can get rid of all those variables. As there’s security in a cash buy, where it’s easy and it should be safe and it should be a very clean transaction. That’s the way it’s supposed to go. But if that price, when you hear it, knocks you over and faints and I expect that sometimes because it is what it is. We have to defer. At least on the Property Guys side, we touch everything. We touch things down to the outlets and the light covers. We make sure that that house is ready for the next generational family. We don’t cut corners.
Eric Scheele:
And so that, that does sometimes come at a cost. And so we have to look at alternative options. Now I get back to our resources and this is why we have some of those resources. We have four crews, we have four realtors. We have a foundation company. We can actually work solutions with homeowners, where we partner with homeowners. We see this a lot with tired landlords. Landlords that are just trying to get out of the business. They’re tired of these renters tearing up their places. And so we see this with estates and probate homes where people, we just did a house in Prairie Village last month that they were in Florida. They transacted and basically conversed with us through a creative solution in Florida, where they never had to step foot in the Kansas City market. But we partnered with them and I fronted, we, KC Property Guys, fronted some of the monies, material and labor and put it to an investor scope of work to ultimately sell the house through KCPG Realty Group, another one of our resources.
Eric Scheele:
And then you have some splits. And it’s all transparent and it’s built ahead of time. It’s a solution where it offers more equity to the homeowner than necessarily the cash buy. Now it does take longer, you’re fixing up the house, you’re taking it through a traditional real estate transaction. But the beauty of that is that when it comes to resolutions, so the way it does work, if you’re not aware of that is as you get a contract and within 10 days of getting that contract, it needs to get inspected. The inspector is hired by the buyers. He’s essentially a hired gun. These buyers have forked over three, $400 to have him look at this house. He’s going to find something. He’s not going to say.
John Lindquist:
He’s being paid to, yeah.
Eric Scheele:
Yeah, he’s paid to. He’s a hired gun. That’s what we talk about all the time. That list of work, that he feels needs to be done to bring this house up to code or up to his standards, you can put three inspectors in house, they’ll come up with three different lists, go figure. But it happens and it’s part of every single transaction. You’re going to renegotiate that transaction again. And in doing that, the beauty of that when you’re in that situation and you’ve partnered with KC Property Guys, again, we got four crews, we got the foundation company, it’s a one stop shop. You just say, “Eric, take care of it all.” And that makes it very easy, even taking it through a traditional real estate option. Sometimes we hand off these houses where I’ll come in and work with a cash buyer or a cash seller and the cash buy price is like, Oh no, not an option.
Eric Scheele:
And we talk about the creative thing, ah, not an option. There’s many alternative forms, that creative thing, by the way. I explained one of many. But maybe we just simply, and it’s always an option, just list it as is. I got four professional realtors with KCPG Realty Group that know how to move houses. They’re power realtors. They’re moving a 140 houses a year between them. And so these guys are not sit back, collect the commission checks at the end of the day and just do it. They work at it and they work hard at it. And the beauty of that is they also have the same resources behind them. They have the crews, they have a foundation company.
Eric Scheele:
And so in doing that and just listing it as is, or maybe with a few items that we do just to kind of bring it up and get it ready for market, which we call pre-list scopes of work, we can put our crews together to get it ready. There’s no splits or anything, but we just help the realtors help their client get to the closing table. There’s lots of advantages in working different solutions, both traditional and nontraditional with KC Property Guys, because of those resources. We’ve exercised them, thought them through, put them to practice and we got reviews to prove it. That’s the beauty of kind of working with a group where it kind of is that one stop shop, that real estate business in the box where you can hit the easy button and you can hit it multiple ways through multiple channels that have different levels of equity.
Eric Scheele:
And it’s kind of two levers. You’re either pulling back the equity a little bit and it doesn’t matter to you because you’re also saving a lot of time and convenience. Or you’re pushing that equity up, increasing the equity. Well that’s going to come with some cumbersomes. Well, let’s try to make that cumbersome, those humps to get you over the bump, easy as possible by using those resources that we have. Lots of different options in there. And when you have so many life scenarios like we’ve done for the last five years and worked so many houses each year, you tend to have seen most everything and have created solutions for those, when it deals with real estate and real estate issues, problems, whatever they may be, scenarios. And we’ve worked through them with our experience. It tends to make for a really clean transaction, regardless of the option you go with.
Eric Scheele:
But yeah, at the end of the day, short answer is there’s definitely multiple options. Everybody calls me for a cash solution because that’s how you find us. But I tend to explain it very early is, hey, no worries. There’s multiple options. If you need to move a house, we can move a house. At the end of the day, we’ll make it as clean as possible. We got a big contingency following of buyers, like I said. We keep those buyers on a list. We hand them over to the realtor so they have them.
Eric Scheele:
We have an out of state following in terms of investors and buyers who are looking for houses in the Kansas City area, because it’s such a nice market. And so we keep all those. We have marketing conduits of multiple channels outside and above and beyond just the normal MLS so it gives our realtors a distinct advantage when moving a house to not only find a buyer, but find a buyer at a higher price. Truly for a higher price. There is a strategic advantage when working with somebody who keeps and understands real estate transactions and who ultimately that target audience is.
John Lindquist:
Right. Well, thank you so much, Eric.
Eric Scheele:
Yeah, you bet.
John Lindquist:
For taking the time to sit down with me and talk about this.
Eric Scheele:
You ready to sell?
John Lindquist:
I don’t think I’m ready to sell. I’m not much of a salesman. I have a hard time with selling people.
Eric Scheele:
You ready to sell your house? That’s what I’m saying.
John Lindquist:
Oh, not my house.
Eric Scheele:
Come on, that was the whole part of this. You’re selling your house. Did I sell you?
John Lindquist:
For me, I think I’m going to stay at my house for a little bit longer.
Eric Scheele:
Give me a few months. This is John’s second podcast. Give me a few months. I’ll have him sold in the new house. He’s going to see something he likes. I guarantee it.
John Lindquist:
Well, that’s all that I’ve got for you today.
Eric Scheele:
Yeah, you bet. And for everybody that’s watching or listening at home, go ahead and subscribe to our YouTube channel or to our podcast channel, whichever one that you are listening to this podcast on. Leave us a comment if you can. We love to hear from you. And until next time, I’ve been John Lindquist and this has been Eric Scheele. Thank you.
John Lindquist:
You bet. Take care.
Speaker 1:
Thanks for joining us this week on the Kansas City Real Estate Industry Leaders Show. Please support all things local to Kansas City, and hey, be sure to subscribe and share our podcast on Facebook and LinkedIn. This has been a KC Property Guys production, kcpropertyguys.com.
If you are looking for a cash buy option in Kansas City, contact us today!
