Dear Monty: Is the home seller’s offer too good to be true?
By Richard Montgomery
Reader Question: An acquaintance that lives in our neighborhood proposed to sell us her home. We have been in the house a few times for neighborhood parties. She bought a home on the west coast and now wants a fast sale. She is in her 50s, divorced for some years, and has always been cordial and friendly. She is willing to sell us the home for about half what it’s worth if we will just exchange cash for a deed and buy “ as is “ to accomplish it quickly.
My husband is a retired contractor and is aware of all the work to be done before we can resell it. He thinks it needs to be totally updated inside and out. She doesn’t want us to use an agent either and wants this to be “low key.” What do we need to do at a minimum to meet her requirements?
Monty’s Answer: Every state has different requirements and procedures. While it may be possible to exchange cash for a deed to accommodate her, it is also possible that to do so would be a significant error on your part. What you need as a buyer is a clear title before you write the check. While she could be acting in good faith, the only way to verify that her motives are pure is to engage a title insurance company to insure the title against loss. Before a title company agrees to do so, they will complete due diligence to ensure that there are no assessments, mortgages, tax liens, or other encumbrances against the property. As an example, did her ex-husband deed his interest back to her, if he ever had an interest? The last thing you want if you go ahead is to invest more capital in the upgrades, and suddenly the ex-husband, who no one has seen for years, shows up. Your potential profit could disappear, and your gain could easily turn into a substantial loss.
Wait, there’s more
Title companies may require a purchase agreement. And, consider requesting a “seller condition report” where the seller discloses any defects. It is possible she is aware of an issue that may not be discoverable by an untrained eye without having lived in the house. Even knowing your husband was a contractor; a home inspection may be a good idea. Even home inspectors can miss a problem, and the circumstances here make a set of trained eyes good insurance. There are additional requirements, such as state real estate transfer taxes and recording fees.
Here are some action steps
You need some good local help. There are several ways to accomplish this task in the fashion the seller is requesting. Any of the following folks can likely do their work in the background, so the seller will only be working with you. Realize that you are at some financial risk committing to these services without a purchase agreement, as an oral contract may not be enforceable.
- Get advice from an attorney who can tell you the pros and cons of every step required, and any additional steps you may want to consider to protect yourself.
- Find a title company to help you. They will know each local requirement and the associated costs.
- Locate an “exclusive buyer broker, ” which means they do not accept listings. Listen to their advice for the best way to accomplish the goal, and protect your interests as well.
You can go to all three of these sources and interview each alternative before making a decision. It is also possible that you divide the tasks and engage two, or all three of them. Neither the attorney nor the buyer broker can insure the title, neither the title company nor the buyer broker gives legal advice, and neither the attorney nor the title company uses the same tools and contacts as the agent. The fees will be different in each scenario. One of them may even present a different solution.
The red flag is waving
This answer may be a bit more than your expected, and we do not wish to frighten you. Your email reminds me of the adage, ” When it seems too good to be true, it usually is.” The fact she doesn’t want a broker involved, and she want it done quickly, while not necessarily a bad sign, does send the “be cautious” signal. Her suggestion about exchanging money for a deed, quickly, raises eyebrows.
“Richard Montgomery gives no nonsense real estate advice to readers most pressing questions. He is a real estate industry veteran who has championed industry reform for over a quarter century. Send him questions at DearMonty.com.”