The Syracuse area will soon be bombarded with the “We Buy Ugly Houses” billboards that have flooded 250 markets throughout the United States.
The aggressive advertising campaign signals that Dallas–based HomeVestors of America, Inc. has entered a new market, explains Dr. John P. Hayes, HomeVestors president, CEO, and chairman of the board.

About two months ago, HomeVestors began looking for franchise owners in Madison, Oswego, and Onondaga counties, Hayes says. At least one franchise should be up and running in the Syracuse area within the next 90 days, he expects. No franchise agreement has been signed yet.

The firm is seeking to establish 45 franchises in counties throughout New York State as well as in new markets in Connecticut and Massachusetts. HomeVestors is targeting 700 franchises within the next five years, Hayes says.

It costs about $150,000 to launch a HomeVestors franchise, including an initial $46,000 franchise fee, $2,500 per month for the extensive advertising campaign that HomeVestors requires of its franchises, and the cost of renting office space, he explains.

The firm’s trademark yellow, black, and red billboards featuring “Ug,” its caveman mascot, are recognizable in HomeVestors’ established markets like Dallas, Atlanta, and Philadelphia.

HomeVestors’ premise is that individuals can rid themselves of unwanted property by selling them to franchise owners. These real-estate investors “flip” houses — which means they renovate undervalued property quickly and efficiently in order to sell it or rent it out at a higher price.

“The biggest problem for real-estate investors is finding properties,” Hayes explains, arguing that the firm’s marketing approach generates enough leads to keep its franchise owners busy.

On its Web site, HomeVestors answers the question, “Does HomeVestors pay market value?” that a typical seller might ask. The company writes, “Any offer you receive will be an amount discounted from the retail value of your house if it was fully renovated. Franchisees are professional homebuyers who buy homes below market value for a profit. However, we close quickly, pay cash, and usually pay all normal closing costs.”

HomeVestors has about 3,000 billboards in the United States, Hayes says.

The firm is the only national franchise that specializes in buying, rehabbing, and selling single-family homes, Hayes contends.

“We have no franchised competition,” he explains. “We’re the McDonalds of this industry, but there’s no Burger King.”

HomeVestors also charges franchise owners a monthly $495 franchise fee, which goes toward national operations, and an unspecified percentage of each home resale.

For its fees, HomeVestors provides the use of its trademarked marketing materials, a two-week initial training program in Dallas, weekly coaching and field support, and an annual training conference.

In 2005, HomeVestors generated $35 million in franchise fees, Hayes says.

Franchises also receive initial financing from HomeVestors to buy investment properties.

“Generally a bank won’t loan money until a house is repaired,” Hayes explains. “We loan interim funds. Then you either sell the property or go to the bank and get a mortgage on it.”

The firm provides its “second eyes” proprietary software. HomeVestors reassesses a property’s value before the franchise owner makes a purchase.

“Because we’re going to loan you the money, we make sure you evaluated the property properly,” he explains. “We may say, ‘here’s something you missed. It has a bad roof.’ That doesn’t mean you can’t buy it, but you may have to change the numbers around.”

HomeVestors’ corporate headquarters employs a 70-person support staff.

Most franchise owners employ their own three to six-person staff, including real-estate agents who buy and sell the properties, construction managers to oversee renovations, and support staff, he says.

HomeVestors conducts a lengthy credit and background check of those wishing to become franchise owners, Hayes says. Although applicants do not need to have a background in real estate, they must have net assets of at least $200,000 in cash or cash equivalents.

The firm is careful about the new markets it chooses to enter, Hayes contends. HomeVestors seeks areas that have an abundance of low-cost, older houses that can be turned around for a profit.

“We look for markets where real estate is a solid investment,” he says. “It certainly is in Syracuse.”

by Claire Duffett, Central New York Business Journal