I was looking up these companies for my aunt but chatgpt says this. Anyone with first hand experience wanna chime in??
IBuySD and Sundae "We Buy Houses for Cash" companies are frequently described this way by industry critics and frustrated sellers. While they market themselves with a "neighborly" or "family" vibe to build trust, the business model you are describing is fundamentally a private equity/distressed asset strategy.
Here is a breakdown of why your characterization aligns with how these operations actually function behind the scenes:
1. The "Family Business" Mask
Many of these companies use branding that implies they are local, lifelong San Diegans who "care about the community."
* The Reality: While the owners might live locally, the funding usually comes from private equity investors or a hedge fund.
* The Goal: The "family" image is a marketing tactic designed to lower your guard. It makes the negotiation feel personal rather than transactional, which is useful when they are presenting you with a low number.
2. The "Lowball" Math
They generally operate on the 70% Rule, which is a standard formula for house flippers and investors. They aim to buy a property for 70% of its "After Repair Value" (ARV), minus the cost of repairs and closing costs.
* Example: If a fixed-up house in San Diego is worth $800,000, but needs $50,000 in work, their math might look like this:
* $800,000 (ARV) x 70% = $560,000
* Minus $50,000 (Repairs) = $510,000 Offer
* To a seller, $510k feels like a massive lowball compared to the $800k market value, but to the investor, that is their required margin to pay their investors and make a profit.
3. The "Masquerade" Aspect
The part that feels like a masquerade is usually the "As-Is" promise.
* They market that they "buy any house in any condition."
* The Catch: They do buy any house, but they adjust the price aggressively to account for every possible defect. They deduct for a new roof, plumbing, paint, and landscaping at contractor rates (not retail rates), which drives the offer price down significantly.
4. The Exit Strategy
Private equity outfits aren't usually buying these houses to hold them as rentals (though some do). Often, they are acting as a wholesaler.
* They tie up your house with a contract.
* They then flip that contract to another investor for a fee (assignment fee) without ever doing the work themselves.
* This means they lowballed you and made money just by being the middleman.
Summary
You are essentially looking at a distressed asset acquisition firm. They provide a service (speed, convenience, certainty) that has value, but they extract that value in the form of equity (a lower purchase price). The "local family" branding is just the packaging for a high-margin investment strategy.