Steve Vanden Noven knows his work doesn’t have the best public image.
“When I first started in this business,” he recalls, “people would say, ‘What do you do, steal homes from little old ladies?’” Vanden Noven, 45, opened a franchise of HomeVestors, the company whose slogan is “We Buy Ugly Houses,” in 2004. But there’s a beauty to the business, he insists.
“We feel we’re making a difference by making neighborhoods better one home at a time,” he says. “When we close on properties, people hug us, they high-five us, they cry with tears of happiness…”
Though she wasn’t quite that emotional, Debbie Dukler, a curly-haired brunette from Glendale, did seem happy to sell her 1873 Glendale farmhouse to HomeVestors. Her husband Joe had inherited the home from his late uncle in 2003. The couple rented it out, only to have the tenant trash the place and stop paying rent, leading to her eviction in April. Before leaving, the tenant tore the Victorian-era wallpaper Joe had painstakingly put up, stole the drapes, and left everything from underwear to garbage strewn about the house.
Enter HomeVestors, a Dallas-based company with six local franchises. Unlike a smaller local company that Dukler first contacted, HomeVestors could close quickly because of the financing available through its corporate office. Vanden Noven made an offer for the home the same day he came out to see it, and the whole deal was done in two weeks.
“I needed to get rid of this house,” says Dukler. “And these guys were perfect for it because it’s like one, two, three.”
At $215,000, the price HomeVestors paid was below market value. (Vanden Noven expects to resell the house for between $280,000 and $320,000.) Yet Dukler didn’t even think about going through a real
estate agent.
“The market’s so soft right now,” she says. And beyond the commission she’d have to pay, there would be around $5,000 in repairs to get everything up to code, yard work to trim the overgrown weeds, and furnishing the home so it would be in good showing condition. Not to mention paying taxes and utilities until the home was sold.
“We don’t have time to be messing with this,” says Dukler.
Though it was a bit pricier than HomeVestors’ typical purchase, Dukler’s case is representative of the company’s target market: someone who wants to sell a home quickly and as-is. The company’s quick cash comes at a discounted price, generally 60 to 75 percent of the home’s value. The company then repairs and remodels the property and either sells it at a profit or adds it to a rental portfolio. Most homes are in the $150,000 to $175,000 range once they’re fixed up. The company does most deals in older neighborhoods that are more likely to have run-down homes, both in the city and suburbs like West Allis, Greenfield, Cudahy and South Milwaukee.
“It’s clever,” says Francois Ortalo-Magne, real estate professor at UW-Madison. “These guys are like used car dealers. They facilitate liquidity in the market.” HomeVestors has a smart business model, he says, because doing it on such a big scale allows the company to spread the risk.
The company’s six franchises have enjoyed a 50 percent growth rate each year since 2004, says Vanden Noven, and together they buy about 250 homes per year. HomeVestors is the only national, professional business in the area that does this full-time, though there are some smaller local competitors.
Still, they represent a “small percentage of the market,” given that 20,000 homes were sold in the four-county metro area in 2006, says Mark Eppli, a Marquette University professor specializing in commercial real estate.
“Properties have always been sold this way,” says Judy Hearst, regional vice president of Coldwell Banker Residential Brokerage. “They’re just packaging it and marketing it differently.” But for customers, such convenience counts.
Editor’s Note:
In August of 2009, two years after this story was published, Milwaukee Magazine was contacted by an individual who claims to be the unnamed tenant described by Debbie Dukler. The ex-tenant says the home had “multiple code violations,” denies damaging the property or tearing off wallpaper, denies leaving the home strewn with trash and underwear or in an unclean condition whatsoever, and says this dispute ultimately went to a judge who ruled the landlord was not owed any unpaid rent. In short, the tenant has a very different recall of the dispute than Dukler does.
