HomeVestors buys 'ugly houses'

Springfield Property Management Inc., a partnership between J. Barry Watts and Gerald “Jay” Vigneaux, signed on as a franchisee with Dallas-based HomeVestors of America Inc. in June. Doug Tapken, who serves as general manager of Springfield Property Management, is in the process of buying into the company as 20 percent owner. HomeVestors, which operates with the slogan, “We buy ugly houses,” officially opened for business at 1334 S. Glenstone, Suite 3-B, in October.

HomeVestors, named to Entrepreneur Magazine's Fastest-Growing Franchises list 2003-2005, specializes in buying, rehabilitating and selling single-family homes.

“Franchisees bought over 6,000 homes in 2005,” said Monica Feid, spokesperson for HomeVestors' corporate office.

Founded in 1989 and franchising since 1996, HomeVestors now has 250 franchise offices in 29 states. There are also offices in St. Louis and Kansas City.

To become a franchisee Feid said, requires a franchise fee of $46,000, along with a monthly fee of $495, a transaction fee of $775 for each property purchased and a marketing fund contribution of $175 for each property purchased.

“We're different than a traditional real estate sale as we buy 'as is,' so there's no reason to do repairs. We'll purchase it in whatever condition it is,” Tapken said. “The slogan is, 'We buy ugly houses.' The house can be a beautiful house, but it can be an ugly situation. For some reason, someone needs to sell sooner rather than later. We're going to appeal to that person.”

Tapken works full-time with HomeVestors, along with a full-time office administrator. Watts and Vigneaux, he said, are silent partners.

A third employee, called a dig lead driver, generates leads by driving a 12- to 15-block area around targeted properties, looking for homes that “haven't been loved for a while,” Tapken said. Direct mail pieces are then sent to those homeowners.

Tapken estimates 50 percent of purchases come through direct mail or referrals. Another 50 percent comes from the 14 billboards in the area, featuring “Ug,” the company's caveman mascot, and its trademarked phrase, “We buy ugly houses.”

HomeVestors, also named to Entrepreneur Magazine's Franchise 500 list each year since 2001, fills a niche not covered by other national companies, Tapken said.

“There's a lot of small mom-and-pops in the market that nail signs up to telephone poles, and we saw the opportunity for a true business that you can do day in and day out,” he said.

HomeVestors' inventory of houses may be sold to investors for rental property, sold to families looking for their own homes or kept as rental property for Springfield Property Management. But the majority of houses will be sold.

“Buy, rehab and resell. That's where you make your living in this business,” Tapken said.

Tapken admits that more money could be recouped if sellers have time to spare. Buying and selling transactions average one every two weeks now.

Springfield Property Management also offers its services to investors.

“They can participate in real estate without having to be hands-on. A lot of people don't have time,” Tapken said. “If you have a good income job, the last thing you want to be doing is plunging toilets on the weekend. This is a way they can buy homes at a discount versus the retail market; capture some appreciation for long-term ownership.”

Ron Votaw, of Nixa, is on Tapken's investor list.

“If something interesting comes along, he'll give me a call and I'll go out and look at it, run my numbers and make a decision,” Votaw said, adding that he's purchased three of his five rental properties from HomeVestors.

Not all properties are spruced up before HomeVestors sells them.

Gayle and Mark Howerton of Ozark used HomeVestors when they decided to unload the duplex in Nixa that they had owned as rental property for 19 years. HomeVestors found a buyer for the Howertons and sold the duplex “wholesale,” Tapken said, without cleaning or repairing.

“Things moved so quickly, and I know with regular realty it wouldn't have been so quick,” Gayle Howerton said.

The Howertons were pleased with the transaction.

“Within the week he had an offer,” Gayle Howerton said. “We probably would've possibly got a little more, but then how long would we have had to wait?”

“If somebody has a home that's in perfect condition and they aren't under a timeline where they have to sell tomorrow, they're going to make more selling through the normal real estate process,” Tapken said.

While it's possible to operate this type of business independently, Springfield Property Management found value in hooking up with the franchise because of name and slogan recognition, ongoing training and monthly newsletters, Tapken said.

Guaranteed in-house financing from the corporation and HomeVestors' proprietary software for bidding on properties were also advantages.

“We walk through the home and do an on-site inspection, and with this software I can make an offer the same day,” Tapken said. “I can do it right in my truck.”

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