HomeVestors FDD Item 19 is the section of the Franchise Disclosure Document that contains the financial performance representations for the “We Buy Ugly Houses” franchise system. For prospective HomeVestors franchisees, this is the section that reveals what existing franchise owners are actually earning, though the data requires careful interpretation. At Lopes Law LLC, we regularly review HomeVestors FDDs and help prospective franchisees understand the critical gap between the gross price differential figures disclosed in Item 19 and the actual net profit a franchise owner can expect to take home.

This guide breaks down what HomeVestors discloses in Item 19, explains why the headline revenue figures can be misleading without proper context, and walks through the specific analytical steps every prospective buyer should take before committing capital to a HomeVestors franchise.

What Is FDD Item 19 and Why Does It Matter for HomeVestors?

Item 19 of any Franchise Disclosure Document is titled “Financial Performance Representations.” Under the FTC Franchise Rule (16 C.F.R. Part 436), franchisors are not required to include Item 19 data. However, if they choose to make any financial performance claims, those claims must appear in Item 19 and must have a reasonable basis. HomeVestors is one of the franchisors that does include Item 19 data, which gives prospective franchisees a starting point for evaluating the financial opportunity.

However, what HomeVestors discloses in Item 19 is the “Gross Price Differential,” which is the difference between the price at which a franchisee purchases a property and the price at which the franchisee sells that property. This is not revenue in the traditional sense. It is not profit. And it does not account for the substantial costs that sit between the purchase and sale of a distressed property.

Understanding exactly what Item 19 includes and excludes is the difference between making an informed investment decision and overestimating your potential returns by a significant margin.

What Does HomeVestors Disclose in Item 19?

HomeVestors’ Item 19 presents the Gross Price Differential and annual advertising spend for franchised HomeVestors businesses that operated for the full 12 months of the reporting period. Based on the most recent FDD data, HomeVestors reported information for 961 franchised businesses that were operating throughout all 12 months of 2023.

The key metric disclosed is the Gross Price Differential, which averaged approximately $603,000 across all reporting franchises. This figure represents the total spread between acquisition cost and sale price across all transactions completed during the year.

The data is typically broken down by quartile and may include geographic segmentation, allowing prospective franchisees to see how top-performing franchises compare to bottom-performing ones. This segmentation is important because the average can be heavily influenced by high-volume operators who complete dozens of transactions per year.

What Does the Gross Price Differential Exclude?

This is the most critical section of this guide, and where many prospective HomeVestors franchisees make analytical errors. At Lopes Law LLC, we consistently find that buyers focus on the headline gross price differential without fully accounting for the costs that reduce that figure to actual net income.

HomeVestors’ Item 19 explicitly states that the Gross Price Differential does not take into account any costs incurred by a franchise in purchasing, rehabbing, or selling properties. Specifically excluded are:

• Repair and rehabilitation costs: The cost of renovating distressed properties, which is the core business activity. Rehab costs can range from $20,000 to $100,000 or more per property depending on condition and market.
• Advertising costs: Including contributions to the local Advertising Council and the National Advertising Fund, as well as any additional local marketing expenses.
• Real estate commissions: Typically 5% to 6% of the sale price when using a listing agent.
• Transaction fees payable to HomeVestors: Ranging from 0.8% to 3.0% of the sales price depending on franchise level.
• Closing costs: Including title insurance, attorney fees, recording fees, and transfer taxes.
• Holding costs: Including property taxes, insurance, utilities, and financing costs during the renovation period.
• Labor, vehicle, insurance, office rent, and other operating costs.
• Monthly franchise fee ($399/month) and marketing fees.

How Should You Interpret the Average vs. Median Figures?

When the average gross price differential significantly exceeds the median, it tells you that a relatively small number of high-performing franchises are pulling the average upward. This is common in real estate investment franchises where experienced, multi-market operators can complete 30 to 50 or more transactions per year while newer or part-time operators may complete only 3 to 8.

The median figure is generally more representative of the “typical” franchisee experience. If the median is substantially lower than the average, it means that more than half of all franchisees are earning below the average figure. This distinction matters enormously when you are projecting your own potential returns.

Additionally, look at the quartile breakdowns. If the bottom quartile shows very low gross price differentials, it tells you that a meaningful percentage of franchisees are struggling to generate volume. Understanding where you are likely to fall in the distribution, based on your market, capital, and experience, is a critical part of the investment decision.

What Advertising Costs Does HomeVestors Disclose?

HomeVestors’ Item 19 separately discloses the average and median advertising spend for franchisees. This advertising data includes contributions to the local Advertising Council and the National Advertising Fund but does not include Marketing Fund Contributions, money spent on “Dig Leads,” or advertising related to marketing properties for sale.

Advertising is a substantial expense for HomeVestors franchisees because the entire business model depends on generating motivated seller leads. The “We Buy Ugly Houses” brand requires significant local advertising to drive inbound calls from homeowners looking to sell distressed properties quickly.

Level 4, 5, and 6 franchisees are required to spend at least $5,000 per month on local advertising. Level 2 and 3 franchisees must spend at least $1,000 per month. These minimums are contractual obligations, not suggestions, and the actual spending needed to generate sufficient deal flow often exceeds the minimums.

How Do Transaction Fees and Royalties Affect Your Bottom Line?

HomeVestors uses a tiered fee structure rather than a traditional percentage royalty on gross sales. Franchisees pay a monthly fee of $399 plus a transaction fee based on the sales price of each property sold. The transaction fee ranges from 0.8% to 3.0% depending on the franchise level, with newer or lower-volume franchisees paying the higher percentage.

For a franchisee completing 10 transactions per year with an average sales price of $200,000, the transaction fees alone could range from $16,000 (at the 0.8% level) to $60,000 (at the 3.0% level). Add the $399 monthly fee ($4,788 per year) and the advertising obligations, and the total cost of the franchise relationship begins to consume a meaningful portion of the gross price differential.

This fee structure is important context when interpreting Item 19 data because the gross price differential does not reflect these franchise-specific costs. A $603,000 average gross price differential does not mean $603,000 in revenue to the franchisee after HomeVestors takes its share.

What Questions Should You Ask Current Franchisees?

Item 21 of the HomeVestors FDD provides contact information for current and former franchisees. At Lopes Law LLC, we recommend that every prospective buyer contact at least 10 to 15 current franchisees and ask specific questions that go beyond what Item 19 discloses:

• What is your actual net profit after all costs? The gross price differential is a starting point, not an endpoint.
• How many transactions did you complete last year? Volume drives profitability in this model.
• What is your average rehab cost per property? This is the single largest variable cost and varies dramatically by market.
• How much do you actually spend on advertising? Compare to the Item 19 disclosed averages.
• How long does a typical flip take from acquisition to sale? Holding costs accumulate daily.
• Have you experienced any disputes with HomeVestors? Check this against Item 3 (litigation) in the FDD.

The answers to these questions will help you build a financial model that is far more realistic than what the Item 19 data alone can provide. For guidance on the full scope of an FDD review, see our article on what to expect from an FDD review.

How Does HomeVestors’ Item 19 Compare to Other Real Estate Investment Franchises?

HomeVestors is one of the larger real estate investment franchise systems, and the fact that they include Item 19 data is a positive signal of transparency. Many competing systems choose not to include any financial performance representations, which leaves prospective franchisees with even less data to work with.

However, comparing HomeVestors’ gross price differential to revenue figures disclosed by other franchise systems can be misleading. A restaurant franchise disclosing $1.2 million in average gross sales is reporting a different type of number than HomeVestors disclosing a $603,000 gross price differential. The restaurant revenue figure already accounts for cost of goods sold being a defined percentage, while the HomeVestors figure has an undefined cost structure sitting beneath it.

The most useful comparison is against other house-flipping or real estate investment franchises, but even then, the cost structures and fee models can differ significantly. At Lopes Law LLC, we help clients evaluate the HomeVestors opportunity against their specific financial goals and risk tolerance, not just against industry averages.

Why Legal Review of Item 19 Is Essential Before Investing

The financial performance representations in Item 19 are the most scrutinized section of any FDD, and for good reason. This is where prospective franchisees form their expectations about potential returns. If those expectations are based on an incomplete understanding of what the numbers mean, the result can be a significant financial miscalculation.

A franchise attorney can help you interpret the data in context, identify what costs are excluded from the disclosed figures, build a realistic financial model based on your specific market and circumstances, and compare the HomeVestors opportunity against other investment options. For additional context on franchise agreement provisions that affect your long-term financial position, read our analysis of franchise agreement red flags to watch for.

At Lopes Law LLC, our flat-fee FDD validation review is $3,000 and covers all 23 items of the HomeVestors FDD. We pay particular attention to Item 19 because it drives the investment decision more than any other single item. If you are considering your options with an existing investment, learn about our franchise exit audit services.

Frequently Asked Questions About HomeVestors FDD Item 19

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Last updated: March 12, 2026