by Michael H. Wasserman
Flippers. Wholesalers. I-buying fin-tech disrupters. Publicly traded REITS. Private equity firms. Boot-strap investors. All out on the prowl for opportunities.
It's never been easier for Chicago area owners to sell homes directly. But should you? What can possibly go wrong? Read on to learn the unpleasant truth, and the things you can do to make the most of these no-broker deals.
It may start with a series of unsolicited offers. Out of the blue. First a letter. Then another. (Look – this one's on yellow stationary!) A note left in the mailbox. A knock at the door. Maybe the allure of those ads on tv and the net. That billboard you keep driving past. Same deal.
"We'd like to buy your house. Just us. No middlemen. No realtors. You won't have to pay anyone's commission. We can pay all cash. Close in two weeks if you want. What do say"?
The money sure would be nice. More house than you need. Getting harder to keep it up. Money is tight. Need a fresh start. Almost seems too good to be true. Or maybe luck is smiling down, finally.
"We'll take care of everything". (Might even pay all the closing costs). "You can live in the house a bit if you need to". "You can leave whatever you don’t want to pack out".
The pitch is pretty sweet. So what's the problem? Wait until you see the purchase contracts. As real estate lawyers who help sellers sell, we have worked on scores of these transactions and have reviewed a good many of the buyer-written, non-standard contracts used. In our experience, here are six of the biggest problems or risks that sellers in these deals face:
The sale price is wrong. If you weren’t planning on selling, odds are you've done little or no research and may not know what your property is really worth. Offers are almost always below market. They know better and they are counting on it. Inspection contingencies without deadlines. That aren’t restricted to major defects or deficiencies. Buyers using standard contracts get only so long to do an inspection and make a decision. Standard contracts limit the scope of what findings are objectionable. These buyers can cancel at any point along the way for any reason, simply by involving this clause. Unwanted house guests. The buyer may want to start marketing the property to prospective tenants, other investors or end-buyers from the moment the contract is signed. You may have to let untold numbers of strangers parade thru your home at the buyer's discretion. You closing date may be an illusion. Fluid at best. There may not even be one. The buyer will close when the buyer wants to close (if they want to close). They may delay. Without penalty. Without explanation. Indefinitely. If they don’t find an end-buyer, they may never. If you change your mind, they will sue you for damages or to force the sale. At least they will have the right. But if they default, you will have little or no recourse at all. Damages limited to the earnest money. And there is never enough of it. Maybe $100. Maybe $500. If tendered at all. Worst of all? No attorney review! Sure, we can point these (and other) issues out easily enough. But once the contract is signed. The deal is the deal. Little can be done. There is no leverage. More often than not, when a prospective seller shows me this contract. it is already too late.As tempting as a non-traditional deal may be, home-owners must take extra care to avoid these common pitfalls. They are easily avoided.
Working with a competent and well qualified realtor can help.
Consulting an experienced real estate lawyer before signing anything too. Some of these terms can be negotiated. Softened to equalize the balance of power. To protect a sellers rights in an important transaction of this sort.
Are you thinking of selling to an I-buyer or an investor? Let us know. We may be able to help.
