You’ve probably seen them while driving around town – those handwritten signs next to the road with messages like: “We buy houses for cash! Call now!”
In the latest installment of our ATXplained series, Austin resident Jennifer Kolb asked:
"What’s the story behind those homemade real estate signs? Who’s looking to buy up these houses, and what actually happens when someone calls their number?"
Kolb is a graduate student studying social work at UT. Before that, she worked for an affordable housing nonprofit.
“Every day on my way to work, I would pass this hand-lettered, white-with-black-marker sign that just says, ‘We buy houses for cash fast!’” Kolb said. “And I was just like – what is that about? That’s weird.”
She also wondered about the method of advertising.
“It was interesting to me because – why a handmade hand-lettered sign if you have enough money to buy my house outright?” Kolb said. “Why don’t you have a nice fancy sign or a billboard or an ad? You know, it’s very anonymous-seeming.”
Kolb thought about calling the phone number listed on the sign, but she was wary. She thought it might be a scam or a way to profit off Austin homeowners who were having trouble paying rising property taxes.
“I’m very aware and conscious of the crisis of affordability, the ways that I have seen just in the time that I’ve lived here, East Austin change drastically, you know, much more white, much more hip," she said. "I’m very attuned to the ways that I see people trying to make money off of that."
It’s not hard to spot these homemade real estate signs around town. We found one in North Austin at the intersection of 53rd and Duval streets that read “Compro casas feas,” or “I buy ugly houses.” The man behind that sign and many others we found is Angel Martinez. He said he’s been in the real estate business for only about a month and things have been fairly slow.
“I’ve gotten pretty much people that are calling, and then they don’t want to follow up, and yeah, it hasn’t been too lucrative yet,” he said.
Martinez is part of a team that is buying up houses around Austin and then quickly selling them to investors. He and his partners advertise to people who are looking to sell their homes fast. When someone calls, he’ll ask a series of questions to determine the value of the home – whether the owners have a mortgage, whether the home needs any repairs. If he decides the house would be a good investment, he’ll offer to buy it with cash.
Martinez said he typically closes these sales within two days. The tradeoff is that wholesalers like him buy houses for less than the market rate. Martinez said he typically offers at least 70 percent of the home’s market value, and the owners agree to take a loss in exchange for a quick, cash transaction.
“Usually, we mostly work with distressed sellers, people that are having trouble,” he said. “Maybe they fell behind on their payments, that they’re getting a divorce or anything like that, and you know, we offer them an easy and fast way out.”
Then, Martinez will turn around and sell the house to a real estate investor. He said he typically makes a $5,000 or $10,000 profit on those transactions. He’s been putting signs all around the city, not focusing on one particular neighborhood, though he said more and more wholesalers have their eyes on property in East Austin. As for the strategy behind using handwritten signs, Martinez said it’s cheap, and he’s heard that these signs are more effective.
“I’ve heard in a bunch of videos that more people get more feedback from the handwritten ones than the ones that are printed out,” he said. “I guess it makes people feel more like they will be talking to somebody more local, makes people call back a little more than the regular ones that are printed out.”
Kolb was surprised to learn the homemade signs were a marketing strategy to try and make the buyer seem local.
“I hadn’t thought about that component of the transaction seeming more possible and fast if it’s someone down the street from you that you can just run over and check in with,” she said. “I hadn’t thought about that, but I don’t think they’re marketing it at me.”
It turns out, many of these signs are illegal. John Hale is an investigator with Austin’s Code Department. He calls these roadside advertisements “bandit signs.” Hale said it’s against city code to post these signs in a right of way or on public property, which, of course, is where you typically see them.
“I mean, it is a Class C misdemeanor so it’s punishable up to a $2,000 fine,” Hale said. “We always like to give people the benefit of the doubt, you know, a new business, they may not have known. We educate them, and then they don’t do it again, but if they continue to violate the city ordinance, then yeah, we would pursue charges.”
Hale said the code department does sign patrol on the weekends, picking up and throwing away these bandit signs. But it’s not long before new ones pop up.
Barrett Raven, a real estate agent and investor in Austin, has a slight fascination with learning about the wholesale market.
“Wholesaling is kind of like this Wild, Wild West right now of real estate, especially in Texas,” Raven said. “I mean, ask a Realtor right now, like, ‘Hey what’s wholesaling? What’s wholesale investing?’ Most people have no idea what it is, so it’s kind of this super niche subgroup of real estate investors, even, who are using this practice.”
Raven said he’s bound by a different code of ethics, and he wouldn’t try to buy someone’s home for less than fair market value. But when it comes down to it, wholesaling isn’t illegal.
“The thing that bothers me the most is just that there are people out there who are just so desperate to sell that they can’t wait to get fair market value on their home,” he said. “I mean, honestly, wholesaling in my opinion has a place in the marketplace.”