So, you have decided to sell your home to a real estate investor? I am sure making that decision has already brought some emotional relief to what no doubt can be a very stressful situation. But as I have warned in previous articles, not all real estate investors are created equal. Unfortunately, there are guys and girls out there who have no intention of conducting themselves honestly and have every intention of using your difficult situation to unfairly or illegally profit.
Here are 3 specific items to help you avoid common pitfalls that can occur when dealing with unprofessional so-called real estate investors:
Most real estate investors I work with use a Texas Real Estate Commission’s (TREC) promulgated contracts. These contracts are pre-written and have blanks to fill in negotiable items, such as price, close date, etc. If someone has given you a contract that is something different than the TREC contract, you really need to hire a real estate attorney or broker to look over what you received. I have seen contracts that said, “the buyer shall have a 2-week look-period.” What? If you’re working with a reputable investor you should be closing in 2 weeks – not waiting on someone to “look.” I have seen other contracts that offer no title company name or number, or they don’t require earnest money. This is no good and a huge red flag to stay away!
Title Company and Earnest Money
This is a big one. Any real estate investor you work with should provide you with the name, address and number of the title or escrow agent they intend to work with. The TREC contract specifies that the buyer has 3 days to deliver earnest money to the title company. You need to call the title company on the 3rd day and request for a receipt of earnest money. If your investor has not deposited earnest money at the title company, this is another red flag and it means you technically do not have a contract. It also means there is a good chance your buyer won’t close.
Proof of Funds
Hopefully your real estate investor has offered you cash and indicated the same on p. 1 of the TREC contract. Before you accept, make sure you request proof of funds. What is proof of funds? Proof of funds is an actual bank statement with a current date on the statement that shows the investor has the cash available to purchase your home. It is NOT a letter from a lender, a redacted print out of a bank statement, or a one page print out from their home computer.
Jennifer and I hope this helps people avoid the pain we witness all too often, when we arrive to clean up the messes left behind by fly by night, so called investors.
Next time I will discuss what wholesaling means and how it could affect your transaction.
In case you don’t know what a standard TREC contract looks like, here is a website where you can download a contract and look it over. These forms are intended for real estate professionals but are available to the public for download.
If you have found a buyer for your home and just are not sure if everything is legit, Jennifer (a licensed Broker in Texas) offers a 2nd look service where she will verify the proof of funds from your buyer and look over the contract for any red flags. She offers this service for $250.00. Click here for more information.