WE BUY HOUSES! Those three words are on just about every corner in every city. Maybe there is an extra adjective like “We Buy UGLY Houses”, “We Buy DISTRESSED Houses”, or “We Buy HAUNTED Houses, but the idea is that it seems like everyone is out to buy your house.
The people behind those signs could be anyone. They could be flippers, wholesalers, legitimate investors, or someone less reputable looking to take advantage of you during what could be a very stressful and vulnerable time.
Generally, if you have a distressed or unwanted property that you need to sell fast or just don’t want to deal with the trouble and expense of selling your house on the traditional market, these people can be a real help.
A legitimate investor can usually buy your property, pretty quickly, for cash and save you a lot on closing costs, fees, and agent commissions. There are, however, some people that hide behind these signs and are looking to scam you out of your house or into a financial position worse than the one you may be in now.
Here are some things you should definitely be aware of:
Like Any Other Business, Real Estate Investors Are In It To Make Money.
That means they are looking for distressed properties that they can put their own money into and eventually sell on for a profit. There is no investor out that that will pay you market value for your property in an as-is condition.
If you are in a position where you want to use an investor to buy your house then you have to be comfortable with that. Remember, it does save you money on repairs, fees, and commissions and is a LOT faster process than if you were to list your house on the traditional market.
Is The Investor or Wholesaler Legit?
Is this a real business or just a google voice number on a sign? Where are their offices? Are they licensed in any way. Do they have any sort of online presence, website, testimonials, business history, or google reviews?
Your home is probably your largest investment and you shouldn’t trust it to a man of mystery with a contract.
You have every right to research the buyer and his past to protect yourself.
How Long Will the Transaction Take?
A good investor can usually close on your property in about two weeks. That may even be the reason you are making the deal. If the investor or wholesaler can’t guaranty some sort of closing date in a time frame that works for you, then it’s probably not something you should pursue. You could end up with your property under contract for the unforeseeable future with no recourse.
Watch Out for A “Bait and Switch”
Once a disreputable investor has your contract, they have been known to start pulling shenanigans. You may be expecting $70,000 for your home but at the last minute, the investor calls, and for some reason, maybe the home inspection, but now they can only pay $50,000. Perhaps later you will be looking at $40,000 and you are out of time. If you are facing foreclosure, or a move then you might be forced into settling for the new price.
Don’t Get Forced into Financing the Sale of Your Own Property.
There are buyers that will try and convince you to maintain the mortgage on your property but sign the deed over to them for cash. But this just means you are still responsible for making those mortgage payments. You are responsible for the financing of the sale of your home.
The buyer may promise to make the payments, but in the end, it comes back to you. If they skip out on the deal you are left holding the bag.
Don’t Become a Renter in Your Own Home.
Similar to the situation above, a buyer might offer to save your home from imminent foreclose by you signing over the deed to them, then you will be allowed to stay on the property and pay rent.
This simply means that you pocket a little cash and don’t get a foreclosure on your record but now you have a landlord and they might be looking to evict you sooner than you would like.
So, How Can You Protect Yourself From These Scams?
Often, when a property is being sold to investors it is being done at a stressful time. A loved one has passed, there is a new job and a move planned, or there may be a foreclosure in the near future.
Bad guys use this to their advantage all the time.
Even though it may seem like you have no time to look into the sale, it is very much in your best interest to do so.
Here are a few things you can do to be more sure of a deal:
- Verify the company – If they are nothing more than a number on a sign then you can do better. Check online, Check the Better Business Bureau, read reviews. It’s up to you to make sure the person you are about to do business with isn’t just “Some Guy”.
- Do they have an office address? I know that in this day and age, it’s common for people to work from home, but if they do have an actual place of business where they can be found, and they work with other people, you can breathe a little easier.
- What is their experience? – Have they ever made a deal before or are you their first? How long have they been in the business? Are there testimonials from other people, that you feel good about? It’s worth looking into.
- READ THE CONTRACT CAREFULLY – I cannot stress this enough. I know it’s a dry and confusing language, but you are well within your rights to ask questions. This is your house we are talking about. Spend time on it. Have a third party look at it. Have a closing attorney look at it if you can. No legitimate investor should ever be shy about their contracts. Don’t sign any papers that you don’t fully understand.
- And finally, Trust Your Gut – If a deal seems to be too good to be true, it just might be. If the buyer never smiles, or smiles too much, or just doesn’t seem….right, then you can definitely pass on his deal and move on. I guarantee there are plenty of real investors out there willing to buy your home and make a deal that works out best for both parties.