HomeVestors has more than 240 franchises around the country. The company was founded in 1989 and started the first franchise in 1996. Last year, it made $27 million. There are four franchises in metro Detroit and there are plans to have 15 operating in coming years.The company appeals to those home owners who want to sell a home — as is — quickly, with as few headaches as possible. Typical clients include those who inherited a home from a recently deceased relative, a retiree looking to downsize and move, a home owner whose house was damaged by fire or a storm, or someone whose home is nearing foreclosure.
“The bread and butter of our work is homes over 25 years old that need repairs,” said Bob Rometo, HomeVestors’ director of franchise development. “People sell for many reasons. Usually there is some form of distress. Financial distress is often the case, and second is situational distress.”
HomeVestors’ advertising sets the company apart from those who post “We Pay Cash for Homes” signs on telephone poles and stick them in the ground near stoplights. HomeVestors uses a complex network that ensures that every franchisee is getting the same number of calls — and, therefore, the same amount of investment opportunities — as its counterparts.
Each franchisee contributes to an advertising and marketing pool, paying $125 per week. For example, in metro Detroit when someone calls the toll-free phone number, the call is tracked and routed so that each franchise gets one out of four calls. This pattern exists as long as each group is contributing equally.
In addition, each franchisee pays a startup fee of about $46,000; a monthly fee of $490, and a $775 transaction fee for each house purchased. “Whether they make $40,000 or $5,000 they only pay a flat fee,” Rometo said.
In general, HomeVestors tries to penetrate markets by franchising one office for every 200,000 to 250,000 people in a community. With 15 franchises they could spend nearly $96,000 on advertising per year.
“That allows us to become the dominant player in the marketplace,” Rometo said. “We want to build an awareness that we are the people who can come in, make an offer and perform. That’s one of the things that separates us from an independent homebuyer.”
In markets like Detroit, where the housing stock and residents are aging, and many are financially strapped, HomeVestors’ offer is appealing. Each franchisee has the discretion to decide what it will do with a home once it’s purchased. Because the homes often are bought at 20- to 30-percent below market price, flipping them for profit is easier.
Typically the franchisee pays contractors to renovate the house. Then it’s either sold to a new home owner or an investor or rented out. “It’s really their call what they do with the property once they acquire it,” Rometo said. “The smart ones are building a portfolio of rental properties.”
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