For Sale By Owner

For Sale By Owner

According to CNN Money some home owners are deciding to ditch brokers and sell their own home.   The trend was echoed by 55% of Marin County home owners who said they would consider selling their own home without a real estate agent.

Let’s assume congratulations on order for your ability to price your home properly and getting a cash offer.  How will you be able to tell if this offer is not from a Wholesaler.

What is a Wholesaler you ask?!  Well, the astronomical rise in price of home has give rise to a new breed of middlemen called Wholesalers.  The sole purpose of these buyers is to place properties under contract and then flip the contract to another buyers for a fee.    These 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) Source Funds:  Proof of funds for these Wholesalers provide typically form an LLC that they have obtained fora fee.   You would well advised to contact the bank associated with this LLC and confirm the availability of funds.   You also need to confirm if that bank has funded any of their deals in the past 12 months.  Keep in mind that these Wholesalers often write 10 or more offers per months and you need to judge the strength of that offer based on the amount of funds in the bank account.

2) Close Date:  This is the strongest indicator that you might be dealing with wholesaler instead of a family who plans to move into your home.  Wholesalers often use 30-45 days on their contract for the close of escrow which is unusual if they have the money ready and their offer does not require any inspection.

3) Earnest Money Deposit:  Any 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.

4) Offer Price:  Typical cash offers form Wholesalers are about 7-10% below your list price. Since they only want a flat fee for flipping the contract a 5-10k profit would suffice.  They could have a fee agreement based on the price of the home as well, but they will need to justify such a fee by writing an offer that is 10% blow your list price.  So, you would be smart 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:  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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