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You’ve probably seen the billboards. Big black and yellow signs proclaiming “We Buy Ugly Houses.” Just who are these people with bad taste and money to burn? Turns out the signs are a creation of HomeVestors of America Inc., a Dallas-based firm that sells franchises to investors who want to use the company’s formula for making money in real estate. It works like this: Franchisees pay $46,000 to join the program and for that they get a two week training course, a personal coach, an exclusive territory and the company’s proprietary software program that helps them analyze how much to pay for a home and how much it will cost to renovate. The goal, says company chief executive John Hayes, is to buy houses for 65 cents on the dollar, fix them up and either rent them, sell them or flip them to another investor in the company’s network. Is that kind of discount really possible in the kind of hot market we’ve had in recent years? Hayes says yes. Last year, HomeVestors’ 250 franchisees purchased 6,500 ugly houses, a 27% increase from 2004. “There are more distressed properties than meets the eye,” Hayes says. “We’re not talking about million-dollar ocean front condos.” Indeed, the average home his franchisees purchased cost less than $100,000.
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.