Dallas-based HomeVestors, which was acquired by Bayview Asset Management in 2022, has more than 1,100 franchisees.
HomeVestors of America says it’s implemented new initiatives to improve the customer experience and prohibit certain franchisee actions after the nation’s largest home flipping franchise was the subject of a scathing series of stories by ProPublica covering questionable selling practices of HomeVestors franchisees. The media coverage last year led to the resignation of the company’s chief executive.
ProPublica published in May a story with the headline, “The Truth Behind ‘We Buy Ugly Houses,’” a slap at the company’s tagline, “We Buy Ugly Houses.” The coverage continued through July with a series of in-depth stories by reporters Anjeanette Damon, Byard Duncan and Millie Simon, who uncovered numerous instances of HomeVestors franchisees deceiving home sellers and targeting people in vulnerable situations.
The coverage was picked up by major news outlets and, as a result of the fallout, CEO David Hicks stepped down. In a letter announcing his departure to franchisees, Hicks said retirement “has been on the horizon for some time,” but he added that “recent press” coverage had taken a “personal toll” on him. Hicks was replaced as CEO by Larry Goodman, the company’s chief operating officer, on August. 1.
ProPublica’s investigation into HomeVestors also set in motion potential government action to better protect the public against predatory real estate brokers. At a June hearing on the Senate Banking, Housing and Urban Affairs Committee, Sen. Tina Smith asked Rohit Chopra, director of the Consumer Financial Protection Board, what his agency can do to better protect consumers from house-flipping companies that use pressure and deception to purchase homes in poor condition. Smith and Sen. Cynthia Lummis also sent a letter to the National Association of Attorneys General recommending state attorneys general take steps to protect homeowners from such predatory buying practices.
House flipping companies like HomeVestors generally offer about 50 to 70 percent of a home’s assessed value, according to reports, before rehabbing the home and putting it back on the market at a higher price.
Dallas-based HomeVestors, which was acquired by Bayview Asset Management in 2022, has more than 1,100 franchisees and landed at No. 54 on the Franchise Times Top 400 with systemwide sales of $1.7 billion in 2022. The company on its website notes it bought more than 140,000 homes since its founding in 1989, which includes nearly 10,000 homes purchased in 2020.
The total investment range for a HomeVestors business is $89,000 to $390,250, according to the company’s franchise disclosure document.
Goodman told Franchise Times the company has addressed the issues raised by ProPublica’s investigation, which the company maintained focused on only a few bad franchisees in the system, and has taken the necessary steps to ensure franchisees are following company-mandated procedures.
“We have devoted significant resources to reviewing our policies, standards and training materials to determine where there were opportunities for us to improve,” Goodman said in an email.
Revised training materials
Among the changes HomeVestors said it has made since ProPublica’s investigation are “revising our training materials to provide our franchisees clear guidelines on how to run a successful business with our customer-first mindset,” said Goodman as he noted negative publicity the company received following ProPublica’s reporting did not impact the number of seller leads, sales contracts or franchise sales in 2023.
“Our business continues to perform well despite the backdrop of the current housing market and economic environment,” he said.
Larry Goodman, CEO of HomeVestors of America
Goodman said the company is hiring additional auditors to ensure its internal compliance program more quickly identifies and remediates situations in which, as he said, “franchisees fall short of brand standards.”
When Goodman responded to Franchise Times’ request for an interview in November, he said HomeVestors was nearing the launch of a Navex EthicsPoint platform for franchisees to anonymously report violations of company systems and standards.
Citing privacy considerations, Goodman said the company would not discuss actions taken regarding the specific franchisees identified in the ProPublica stories who were accused of predatory selling practices. But he did confirm that at least some of the franchisees named in the coverage “were no longer part of the franchise system when the stories were published.”
ProPublica’s coverage of HomeVestors’ questionable selling practices highlighted a 2016 case in which one of the company’s franchisees bought an 82-year-old woman’s three-bedroom home in suburban Los Angeles after making a lowball offer.
The woman had dementia and was incapable of complex negotiation, according to the story. Her son was outraged and tried to cancel the sale, but the franchisee already had the house under contract. The HomeVestor franchisee who negotiated the deal ended up pleading guilty to two felony counts of attempted grand theft by false pretenses, prosecutors reported.
Another tactic uncovered by ProPublica was franchisees putting a cloud on a title, even though the property had not been transferred yet. This maneuver made it nearly impossible, or at least very complicated, for adult children or other caretakers to unwind an unscrupulous transaction that took advantage of seniors with cognitive declines.
Goodman refused to disclose the names of franchisees who were either terminated or disciplined.
“For those who were still active franchisees, HomeVestors undertook an investigation into the underlying facts of the transactions to determine what remedial actions were required. For some, we uncovered additional facts that mitigated their alleged conduct. For others, we determined that they failed to meet our standards in their dealings with customers. Those franchisees were subject to discipline,” he said.
Three-day opt-out period
Goodman said HomeVestors implemented a major policy change in the fall of 2023 to standardize consumer-focused disclosures throughout the system and added a three-day no-questions-asked option period for sellers to terminate their sales contracts. The disclosures and option period are included in a contract addendum that HomeVestors franchisees now include with their purchase transactions with sellers who are not financial institutions, professional investors or are otherwise represented in the sale, according to Goodman.
“We call this The HomeVestors Advantage,” he said. “We want to ensure that everyone who does business with HomeVestors understands the available options for selling their house and is fully informed regarding our status as a discount homebuyer. We do not know of any other national real estate company who provides sellers with such an addendum.”
Goodman said the company has also banned the use of lis pendens, a written notice that a lawsuit has been filed concerning real estate, involving either the title to the property or a claimed ownership interest in it, in the franchise system. It also prohibits franchisees from taking any action to cloud a title or otherwise restrict an owner’s ability to transfer property.
“For the benefit of consumers, we have formally prohibited franchisee advertising activities that are intrusive, and continue to refine our guidelines to reflect consumer-focused best practices,” he said.
Franchisee feedback line
A spokesperson for HomeVestors said one of Goodman’s first actions as CEO was to create a feedback line directly to HomeVestors’ corporate via its public-facing websites. She also pointed out that HomeVestors increased opportunities for franchisees to participate directly in regular online meetings with the senior executive team.
“These open-forum meetings allow franchisees to provide timely feedback from the field so that the executive team can more quickly address concerns,” Goodman said.
Rob Caldwell of The Cornerstone Group in Mooresville, North Carolina, who has worked for HomeVestors for nearly 19 years, said he welcomes the recent changes made by the company.
“As a development agent with HomeVestors, I am more accountable than ever to the franchise owners that I train and support from the field,” he wrote in an email. “I am required to follow and meet performance standards set forth by the franchisor. This is something I appreciate very much as it will only make me a better coach, as well as give franchise owners peace of mind knowing that everything we do for them is always in their best interest and intended solely for their success.
“Change is usually uncomfortable for most people, but from the changes we have experienced so far, we know that the intent is to make the relationship between the franchisor and franchisees better, and elevate the brand and improve the services we offer,” Caldwell said.
Franchise Times reached out to over a dozen current and former HomeVestors franchisees for this story. With the exception of Caldwell and Ron Jackson in Cary, North Carolina, who said he is impressed with the company’s new leadership and their changes, they either did not respond to the request for an interview or declined to comment.