New To REI Selling MY House Am I Being Scamed?
Hi folks, I am selling my house (FSBO) to learn about this process so after I get settled I can learn more about this, and get started on my own. I have a fairly urgent need to move that is why I am looking at doing it this way. I have and investor who has offered me a fair price but I need to sign a addenda.
basically he told me he has a "trust" that will be the money behind his buyer, in essence he finds money for the buyer that has been turned down for other types of financing.
The addneda I need to sign (company names removed) This sale shall be contingent upon (company name removed) finding a buyer that shall qualify for owner financing according to accepted critera of (company name removed) and its funding sources. funds from the Hypothecation of the note and Mortgage shall be used to purchase the property at closing. Alternative funding sources may require seller and sub-buyer to contract directly in which case buyer shall be paid (LEFT BLANK ON FORM) to release all rights in this contract to seller.
I will be having a atty. look at it in the AM but I figured if I am going to learn this stuff I may as well ask some experts. THis person is being very nice and has explained the process after I told him I was interisted in getting into REI once I get moved.
Anyway comment as you will I appreciate any feedback you can give!
Basically I am wondering if this is a "Standard" in the Biz or am I being hosed...
-Smitho-
Smitho,
It looks to me as if this investor is going to do what's called an "assignment of contract." I'm not quite sure why he used the words he did in the addendum, but you should still consult an attorney to make sure you know what it means. This is the basics of what the investor looks like he is going to do:
1. Get the property under contract with you for say $75K, even though the property is worth $100K.
2. Find a buyer who will pay him more than $75K for the property.
3. Assign the contract over to the new buyer for say $90K.
4. The investor will collect $15K via the assignment. The new buyer will get a house with $10K in equity. You get the property off your hands.
The only reason why sellers get rid of their homes for so little is time and circumstances. Motivation is the key to finding great deals, but you should create a win-win situation for everyone involved. If the seller is satisfied that his/her house is off their hands, then the investor can pick up a property and profit from it. From what I see, then he isn't scamming you. But, please consult an attorney to make sure there aren't any other factors you did not account for before selling.
Tanya[ Edited by tanya1215 on Date 07/08/2003 ]
Thanks Tanya, I was probably a bit harsh in using the word scamming. If the deal goes through as I think it will I am definatly giving him a deal but because I need out I need to do it this way, Hopefully I will find someone in my position in the long run
I'm new to alot of the wording and some of it sounds shady, that wat the reason for concern, as long as I can walk away with what I need and no liabilities, I am MORE than happy to complete this transaction, I am just leary which it is better to be safe than sorry.
A good learning experience, I've done some home work since the post and this person seems to be legit and on the up and up.
Being a non-traditional sale and my first time to boot (on the ""losing"" end) I just want to be sure I can walk away.
THanks much, hopefully I'll be on the other end of the contract soon!
-SMitho-
I don't think he's trying to 'pull a fast one' on you, however I don't particularly like the wording of his contract.
I believe that Tanya is correct about him leaving himself an option to assign the purchase contract though he was worded it much more complicated than it needed to be. But the part I don't like is that he has made it contingent on HIM finding an acceptable buyer. If he doesn't find one, then you have NO SALE. That means that he can tie up your property and keep you from selling to anyone else, but he doesn't have to go thru with the purchase if he doesn't find a buyer.
Unless you're getting a large non-refundable equity deposit, this doesn't help you at all. What if someone else comes along and offers you more money? You can't sell because it locked up with a contract.
I'd counter with a Non-exclusive option to purchase agreement (sometimes called a 'first right of refusal'). This gives him basically the same rights as he wants, but allows you to still accept other offers.
Ask a local realtor or attorney for a copy of one, but basically it allows him to make you an offer with a time limit to close, but you can still market the home and accept other offers that may come in. If another acceptable offer does come, then he has 48 hrs (or another predetermined length) to sign a purchase agreement or lose his 'option to buy'.
Roger
Roger,
He is Definatly doing this to "flip" it for sure, I like your idea, (Non-exclusive option to purchase agreement) and if he is serious then he will not mind signing one.
Yeesh... Looks like I have alot of reading to do, but I imagine these things vary from state to state so I'll start digging once we find our new home!
I will post the results of the transaction here in case someone is interisted!
Take care, and I thank you all! -Smitho-[ Edited by smitho on Date 07/08/2003 ]
tanya, great reply.