When I finished a listing appointment on Friday I checked my voicemail, and one of my clients had left me a message asking me to "look over a contract" that he had faxed me... "Very interesting", I thought. What exactly did he mean, and why was someone giving him a contract to sign without involving me? It immediately raised my "suspicious" antenna. When I got back to the office, I saw a 2 page document titled "Contract to Buy and Sell Real Property" sitting on the fax machine. The words on the contract were actually in normal type size and could even be understood by most people, so it looked nothing like our standard 8 page, full of "legalese" North Carolina Offer to Purchase that we commonly use.
Looking at this new offer on the table, I was hopeful it was legitimate, but I had my doubts. I then saw that this person was offering full price, no closing costs, and could close in a week! Given that this home had been on the market for a few months, I felt something was probably not right. What was it though...? It had to be in here.... Property description looks fine... Purchase price paragraph looks fine.... no contingencies... seller has to convey clear title... Purchaser may assign the contract (ok. Not surprising since I'm sure this is an investor)... Seller must maintain insurance until closing... So far everything looks fine, and I'm almost at the end of the 2 pages. Wait... here is one last thing just above the place for the signatures... "Clause: Purchase of property is subject to existing financing."
Did you catch it?
I called my Seller client. After a few minutes of general conversation... "So, an investor wants to pay you full price for your house?"
Seller: "Yes. He said he has some buyers he's working with. He thinks he could get $10,000 more for it within 60 days."
Me: "Really? Did he tell you that YOUR loan would still be in place, and that if they don't make payments on your loan then you could get your credit damaged? Did he also tell you that you will probably not be able to buy another home since you'll still have the outstanding mortgage on the home you are selling?"
Seller: "What??!! Where does it say that?"
Me: "Right above the signature section."
Seller: "You mean those 8 little words say that?"
Me: "Yes. Just 8 little words."
Seller: "Man am I glad I didn't sign that! Thanks!"
Unfortunately, there are a lot of people out there right now who are being taken advantage of by investors who are unscrupulous and smell blood in this real estate climate. Don't get me wrong, I have nothing against investors who legitimately help troubled sellers out of probable foreclosure. However, there are some Sellers who are not in any financial trouble who are simply "For Sale By Owner" who may not catch the tricky language that a more seasoned buyer, or even a less-than-ethical agent, throws in to the deal without thoroughly explaining the implications. Yes, it's true that sometimes the transaction will go through without a single incident and the seller wonders what value the real estate agent had in making the transaction go to closing. However, just as most planes can fly pretty much on autopilot these days, it is crucial to have a trained real estate agent who will negotiate contracts at the controls, if for nothing else, to make sure that, when unexpected turbulence arises, someone is on your side to make sure you don't have a crash landing resulting in financial disaster!
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