Are you selling your own home? Do you have a cash offer ? Well, congratulations on your hard work has just begun to see if this buyer will indeed close the escrow on your house. But before we get to dissect the offer in detail to see if you got a real cash deal, lets get some background.
The astronomical rise in price of home has give rise to a new breed of middlemen called Wholesalers. The sole purpose of a wholesaler is to tie up properties and flip the contract to another buyers for a flat fee. These Wholesalers have no intent or interest to close the escrow on your house and if they might have other cash buyers in the wings and the minute you accept their offer, they will sell the contract to these buyers.
So, the challenge facing the For Sale by Owners is to spot the fake offers from the real ones. Here are some clues :
1) Proof of Funds: Proof of funds for these purchases is typically form an LLC that these Wholesalers have paid a fee to obtain. You need to contact the bank associated with this LLC and confirm the availability of funds. However, keep in mind that even if the bank account associated with your buyer’s offer has sufficient funds your sale price, these guys write more than 10 offers per months!
2) Escrow Close Date: This is the strongest indicator that you might be dealing with wholesaler since they often ask for 30-45 days to close which might seem normal to the un-initiated. But you have to ask yourself if someone has the cash ready then why would they need 45 days to close; specially if they don’t have any contingencies with the offer.
3) Offer Price: Typically the cash offers from Wholesalers are about 5-10% below your list price. After all, they are only interested in flipping the contract to someone for a $5-10k fee and not interested in closing an escrow on your house. If you counter them at a higher price, they typically walk unless you are in a appreciating market where if they anticipate an appreciation in price during their hold period, they will counter you.
4) Deposit Amount: Any serious buyer should put at least 3% of their offer price as their initial 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.
So, you would be well advised to understand the significance of the Deposit Amount and the role it plays in communicating your buyer’s intent and interest on the property.
Conclusion: Just like any other contract negotiations, a real estate transaction is a complex legal term and contingencies between 2 parties. But the mere size of these transactions can attract Wholesalers who can only complicate and delay your 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. But challenges to selling your own home are not insurmountable, but it requires serious planning and education on your part.
Contact Us if you need help with your Silicon Valley home sale.