For Sale By Owner

For Sale By Owner

Are you you tempted to sell your own home? According to CNN Money home owners are deciding to ditch brokers and sell their own home.   This desire was echoed by 55% of Marin County home owners who said they would consider selling their own home without a real estate agent.

But if opt for a FSBO, how will you be able to tell your buyer is not a real estate wholesaler.

What is a Real Estate Wholesaler you ask?  Well,  a real estate wholesaler is a fake buyer who will flip your contract to another buyer for a fee.  Yes, the astronomical rise in Silicon Valley home prices has give rise to this new breed of middlemen called Wholesalers.  Their sole purpose is to place properties under contract and then flip the contract to another buyers for a fee.    These real estate wholesalers have no plans to close the escrow on your house and are only in it for a quick fee.

So, the challenge facing the For Sale by Owners is to spot the fake offers from the real ones.  Here are some clues :

1) Close Date:  This is the strongest indicator that you might be dealing with real estate wholesaler instead of a real buyer.  Wholesalers often use 30-45 days on their cash offer to close of escrow which is unusual if they have the money ready and their offer does not require any inspection.  So, avoid these buyers since they won’t be closing your escrow.

2) Option to Assign:  This is yet another strong indicator that the contract from this buyer will be assigned to another buyer.   You will see these terms in either an addendum or the body of the purchase agreement as “additional terms“.   Keep in mind that most lender will not honor these kind of terms if this buyer wanted to obtain a loan to purchase your home.  So, reject these offers if you intend to sell your home to a real buyer.

3) Source Funds:  Proof of funds (POF) for most real estate wholesalers is a typically form an LLC that they have obtained fora fee.   During one of our Short Sale transactions in San Jose, one wholesaler provide a POF for $1M which was sufficient to purchase price of the home, but you need to remember that these wholesalers write 10 offers per week in hopes of trapping one un-suspecting buyer.    So, examine the proof of funds carefully.

4) Earnest Money Deposit:  Most serious buyer would offer a minimum 3% of their offer price as earnest money deposit.   But wholesalers typically put only very little as their deposit since this it the only funds at risk if they refuse to perform.     In contrast we use the Deposit Amount to confirm and validate our buyer’s serious intent to purchase the property and on some offers we offer the full price of the offer as Deposit.

Conclusion:  A real estate transaction contains complex legal term and contingencies between 2 parties.   But the mere size of these transactions  is now attracting Wholesalers who can only complicate and delay your home sale.  Also, according to National Association of Realtors, 28% of the homes sold by their owners were under-price which means as owners you might be starting your negotiations at a huge discount.

Contact Us if you need help with your Silicon Valley home sale.


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