5 Things Investors Don't Want You to Know About Their Contracts

 

Selling directly to home buyers or investors has become more and more common in today’s real estate market. Being able to sell your home as-is, fast for cash can have a lot of appeal.

As you already know, the biggest downside of working with an investor is having to sell your home at a discount. What most people don’t know is what to look out for in their contracts. Oftentimes selling your home to an investor means doing so without a realtor. With no realtors involved, the responsibility falls on you to know what you’re signing and if it’s a fair and safe agreement for you.

Far too often homeowners have fallen prey to investors’ unfair contracts. These contracts, unchecked, give investors the upper hand through legal loopholes. Knowing what to look for will help protect you and give you confidence in your decision of who to work with. Consider the following when selling your property to an investor:

 

1. They will “shop” your property

Without you knowing, investors, who can’t afford to buy your property, will “shop” your property to investors who can. If they can’t find another investor, they‘re likely to cancel the contract, leaving you right back where you started. Make sure the person signing the contract is the one buying the house.

2. No visit = No offer

Before seeing your house, or understanding your situation, investors may give you an offer over the phone or online. More likely than not, an investor will reduce their offer after walking through the house. This can feel like a “bait and switch”. Make sure the investor giving you an offer has seen your house first.

3. Don’t get left behind

Investors can hide behind lengthy inspection periods. A confident investor shouldn’t need an excessive amount of time to inspect your property. Most inspection periods run 3-10 days, some aren’t even needed. Make sure to ask the investor what will take place during the inspection period.

4. Put their money where their mouth is

Earnest money represents the investor’s level of commitment to you and the transaction. Earnest money should be non-refundable. Investors will try to commit little to no earnest money in case they want to cancel. Be wary of investors who are unwilling to offer reasonable and non refundable amounts of earnest money. A good rule of thumb is 1% of the offer or more.

5. Show me the money!

A “Proof Of Funds” letter ensures that the investor has enough money to buy your home. Make sure to request and verify their “Proof Of Funds”.

 

Questions to ask an investor:

  1. How often do you cancel a contract with homeowners? Do you intend to “shop/assign” the property to another investor before closing?
  2. Once I receive my offer will the price change after you walk through the property?
  3. What do you plan to inspect on my property and how long will it take? What is the likelihood the offer will change after your inspection? Are you willing to waive your inspection period and if not, why?
  4. Are you confident enough in your offer to commit 1% non-refundable earnest money?
  5. Are you willing to provide proof of funds during the walk through of the property? Are you comfortable having me verify it with your bank/lender?

 

You deserve to be in control of the sale of your property. The questions above will help level the playing field. Make sure to work with an investor you can trust.

 

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