How do we check to see if this offer on our house is legitimate?
December 4, 2014 6:10 PM Subscribe
My parents just inherited my grandmother's house, a burden they are not happy with. At first they were worried they would have to keep the house for the time being and hire a realtor to get it sold - they are not in a place to take on the cost of a second house, even if it is just temporary. Now suddenly out of the blue, a relative of my grandmother calls and offers the services of her step-son, someone who pays cash for houses and fixes them up. I'm a little suspicious and want to check that this isn't a scam.
We don't know anything about the step-son other than his name. The relative says he works with a partner but could not give us the name of the partner, or of their company (if they operate as one), but this lack of this information is, I think, because of the relative's grief and a "I don't want to get involved, I've done enough" stance rather than any kind of stonewalling. The relative is not someone I know well but my mother does and has no reason not to trust her. Google doesn't return anything about the step-son that I can find but I don't think I'm looking in the right places. Where should I be looking?
The house in question is in good shape and in a stable, up-and-coming Chicago neighborhood. The offer the relative proposed (and again, it wasn't a direct offer, more of a suggestion of what might be possible) was that the step-son would pay cash for the house and it's contents, basically sight unseen.
Have you ever dealt with this situation before? Where should I be looking to check if the step-son is a scam artist or if this is a shady deal all around? And should my parents consult an attorney about this kind of sale? Should the house be appraised first?
If this sort of offer is the real deal then they'd be thrilled. They want to be rid of this house fast.
Any help you can give us will be very, very much appreciated.
Thank you!
We don't know anything about the step-son other than his name. The relative says he works with a partner but could not give us the name of the partner, or of their company (if they operate as one), but this lack of this information is, I think, because of the relative's grief and a "I don't want to get involved, I've done enough" stance rather than any kind of stonewalling. The relative is not someone I know well but my mother does and has no reason not to trust her. Google doesn't return anything about the step-son that I can find but I don't think I'm looking in the right places. Where should I be looking?
The house in question is in good shape and in a stable, up-and-coming Chicago neighborhood. The offer the relative proposed (and again, it wasn't a direct offer, more of a suggestion of what might be possible) was that the step-son would pay cash for the house and it's contents, basically sight unseen.
Have you ever dealt with this situation before? Where should I be looking to check if the step-son is a scam artist or if this is a shady deal all around? And should my parents consult an attorney about this kind of sale? Should the house be appraised first?
If this sort of offer is the real deal then they'd be thrilled. They want to be rid of this house fast.
Any help you can give us will be very, very much appreciated.
Thank you!
I know someone who does this. He pays cash for houses people want to sell quickly and then either fixes them up cosmetically and sells them or rents them.
It's not predatory but it does rely on people wanting or needing to sell in a hurry (eg leaving town, inherited a house and would rather have money, lost their job, etc) rather than taking the time to sell the regular way. Because he is paying cash he can buy places that, to get a mortgage, would need repairs or are full of decades of possessions and trash.
But yes, to protect yourself you would take the ordinary steps such as a lawyer and consider the other options like fixing it up yourself and selling the regular way.
posted by Dip Flash at 6:22 PM on December 4, 2014 [6 favorites]
It's not predatory but it does rely on people wanting or needing to sell in a hurry (eg leaving town, inherited a house and would rather have money, lost their job, etc) rather than taking the time to sell the regular way. Because he is paying cash he can buy places that, to get a mortgage, would need repairs or are full of decades of possessions and trash.
But yes, to protect yourself you would take the ordinary steps such as a lawyer and consider the other options like fixing it up yourself and selling the regular way.
posted by Dip Flash at 6:22 PM on December 4, 2014 [6 favorites]
At the very least they should be finding out what this is worth on an open market via a realtor to make sure they don't get really screwed. Then it's a matter of crunching the figures to find out if the convenience of selling quick outweighs the hassle of prepping the place for a normal sale and probably more money.
posted by Jubey at 6:37 PM on December 4, 2014 [6 favorites]
posted by Jubey at 6:37 PM on December 4, 2014 [6 favorites]
"Cash For Your House Fast" or "We Buy Ugly Houses" (usually advertised with only a phone number, on billboards and signs slapped up at junctions) are a thing, in the way that payday loans are a thing. They're investors whose shadiness varies from "will take advantage of your timetable to get a sweet deal on a flipper" to "will completely screw you over". Since those kind of investors often don't need any kind of licensing, Google probably won't help, but searching property tax records for previous transfers might. (Even then, investment property might be bought and sold under a business name.)
There are potentially more... middle-class ways to get a better result: look for realtors who are tapped into the investor / cash buyer market, and might accept a fixed cash incentives for a fast sale within acceptable range of the appraisal in lieu of any commission gained by holding on for a higher price. For something like that, you'd want to make extra sure the appraisal was independent.
posted by holgate at 7:12 PM on December 4, 2014
There are potentially more... middle-class ways to get a better result: look for realtors who are tapped into the investor / cash buyer market, and might accept a fixed cash incentives for a fast sale within acceptable range of the appraisal in lieu of any commission gained by holding on for a higher price. For something like that, you'd want to make extra sure the appraisal was independent.
posted by holgate at 7:12 PM on December 4, 2014
There are definitely plenty of investors out there who pay cash for houses; some are more shady than others. What they have in common is that they only buy if they can obtain the property for less than what it could get on the open market. In your parent's situation, it may be worth a couple hundred bucks to have an appraiser estimate its value for you. You could also get a realtor to give you something called a "broker price opinion" which may be cheaper and quicker, though the agent may pitch you their services. Either way, I think they'd definitely want some kind of third-party take on this before seeing what the mystery son-in-law is offering. If he's offering $100K for a house that'd be worth $150K on the open market, isn't that worth putting up with a couple months of hassle to get a realtor to sell it for you for closer to market price? Even with the commission and taxes, the difference may be worth tens of thousands to your parents.
Sidebar -- your parents may be tempted to turn to Zillow or one of the other search sites to get a sense of the house's value. Zillow estimates are usually in the ballpark, but there's no guarantee --- and sometimes they can be off by as much as 20% or more, in either direction. They admit this. E.G., if it says the house is worth $120K, it might be anywhere from $100K to $150K. The older and more unusual the house is relative to its neighborhood the more likely the Zestimate is to be inaccurate. In this situation, where they're going to be evaluating a cash offer for the property, having a opinion from an actual local realtor or appraiser who knows the neighborhood well would be worth it.
posted by Diablevert at 7:33 PM on December 4, 2014 [1 favorite]
Sidebar -- your parents may be tempted to turn to Zillow or one of the other search sites to get a sense of the house's value. Zillow estimates are usually in the ballpark, but there's no guarantee --- and sometimes they can be off by as much as 20% or more, in either direction. They admit this. E.G., if it says the house is worth $120K, it might be anywhere from $100K to $150K. The older and more unusual the house is relative to its neighborhood the more likely the Zestimate is to be inaccurate. In this situation, where they're going to be evaluating a cash offer for the property, having a opinion from an actual local realtor or appraiser who knows the neighborhood well would be worth it.
posted by Diablevert at 7:33 PM on December 4, 2014 [1 favorite]
Get a real estate lawyer. If that doesn't scare the guy off, let the lawyer handle selling the house properly and fairly.
That's what they're for.
posted by Lyn Never at 7:45 PM on December 4, 2014 [4 favorites]
That's what they're for.
posted by Lyn Never at 7:45 PM on December 4, 2014 [4 favorites]
I'd be cautious of the part of the offer that involves selling the contents of the home as part of the sale. Who knows what kind of valuables linger. My point is - get in there and make doubly certain that the valuables (or sentimental items - to you or anyone else) are removed before you agree to sell any contents with the property.
posted by whatisish at 8:06 PM on December 4, 2014 [5 favorites]
posted by whatisish at 8:06 PM on December 4, 2014 [5 favorites]
Do you mean a scam in the sense that this person might somehow make off with the house without paying for it at all? Or do you mean a scam in the sense that this person might try to pay you less than the house is worth?
For the former, there's still generally lawyers or notaries involved in the process of the land transfer that make sure the funds are actually paid before the title is moved. It's not like they show up with a briefcase of cash and you hand over a paper deed and it's done and then you find out that the money is fake. Cash in this case likely means a cashier's cheque or wire transfer from their bank.
Real estate tv shows kind of give off the impression that houses have a single value that can be adjusted up and down by renovating them or even just painting them. But the reality is that houses don't really have a particular value and the sale of a house is essentially a really slow auction. How much people will pay for them will depend on so many unpredictable factors down to which buyers made it to the open house and which buyers decided you know what, they've already seen 4 houses today and they're just going to stop at Starbucks and then go home. How quickly you want to sell the house has a big impact, as well -- on the one hand, some people will pay a premium for fast occupancy. On the other hand, a motivated seller will often have to take less money now rather than waiting for better weather or until the market picks up or until more offers have come in.
A buyer who buys houses sight unseen for cash is not going to pay a premium for anything and is going to be expecting a bargain. But a low selling price doesn't necessarily mean a scam. Your parents can do their best to ascertain a rough estimate of the value ahead of time (appraisal, broker assessment, etc) and then determine how much of that value they're willing to trade to get it off their hands. And then evaluate the amount of the offer against the information they already have.
posted by jacquilynne at 8:08 PM on December 4, 2014 [5 favorites]
For the former, there's still generally lawyers or notaries involved in the process of the land transfer that make sure the funds are actually paid before the title is moved. It's not like they show up with a briefcase of cash and you hand over a paper deed and it's done and then you find out that the money is fake. Cash in this case likely means a cashier's cheque or wire transfer from their bank.
Real estate tv shows kind of give off the impression that houses have a single value that can be adjusted up and down by renovating them or even just painting them. But the reality is that houses don't really have a particular value and the sale of a house is essentially a really slow auction. How much people will pay for them will depend on so many unpredictable factors down to which buyers made it to the open house and which buyers decided you know what, they've already seen 4 houses today and they're just going to stop at Starbucks and then go home. How quickly you want to sell the house has a big impact, as well -- on the one hand, some people will pay a premium for fast occupancy. On the other hand, a motivated seller will often have to take less money now rather than waiting for better weather or until the market picks up or until more offers have come in.
A buyer who buys houses sight unseen for cash is not going to pay a premium for anything and is going to be expecting a bargain. But a low selling price doesn't necessarily mean a scam. Your parents can do their best to ascertain a rough estimate of the value ahead of time (appraisal, broker assessment, etc) and then determine how much of that value they're willing to trade to get it off their hands. And then evaluate the amount of the offer against the information they already have.
posted by jacquilynne at 8:08 PM on December 4, 2014 [5 favorites]
If you don't care about getting the best price for the house and just want it dealt with then go for it - that's how these people's businesses work. They pay less than the property is worth but take on the risk of trying to resell and if he's buying the contents too - dealing with all that, clearing it out and making it presentable to potential buyers - he'll probably redecorate too.
His fee comes from the profit he'll make by being in a position to get the best price and even wait to get the best price.
If you can manage it, I would get it appraised and remove any contents that you want then see what he offers. You don't have to accept his offer.
posted by missmagenta at 1:22 AM on December 5, 2014 [1 favorite]
His fee comes from the profit he'll make by being in a position to get the best price and even wait to get the best price.
If you can manage it, I would get it appraised and remove any contents that you want then see what he offers. You don't have to accept his offer.
posted by missmagenta at 1:22 AM on December 5, 2014 [1 favorite]
Real estate agents are very familiar with the motivated seller. It is a regular part of the business.
Seems to me that any genuine "flipper" will have references in the form of houses he has sold to people after upgrading. That is where you can find out if he does solid work.
posted by megatherium at 4:17 AM on December 5, 2014
Seems to me that any genuine "flipper" will have references in the form of houses he has sold to people after upgrading. That is where you can find out if he does solid work.
posted by megatherium at 4:17 AM on December 5, 2014
If I inherited a house, I'd have it professionally inspected and appraised. It would cost me about $700, but I would know exactly what I had and I could make good decisions from that point. That way I'd know if the offer was fair or ridiculously undervalued.
If you are ignorant of what you have, you will fall prey to easy. Easy is good if you can afford it. But is it worth tens of thousands of dollars to your parents?
It's overwhelming, I get it.
One thing they can do is contract with an Estate Sale agent to deal with the contents of the house. Sell the house empty. Make money on the contents.
Once empty the house can go on the market. Price it right and it will sell quickly.
posted by Ruthless Bunny at 4:52 AM on December 5, 2014 [1 favorite]
If you are ignorant of what you have, you will fall prey to easy. Easy is good if you can afford it. But is it worth tens of thousands of dollars to your parents?
It's overwhelming, I get it.
One thing they can do is contract with an Estate Sale agent to deal with the contents of the house. Sell the house empty. Make money on the contents.
Once empty the house can go on the market. Price it right and it will sell quickly.
posted by Ruthless Bunny at 4:52 AM on December 5, 2014 [1 favorite]
Get a lawyer. Have the lawyer require that all money is placed in escrow before closing.
Problem solved.
posted by Flood at 5:50 AM on December 5, 2014 [1 favorite]
Problem solved.
posted by Flood at 5:50 AM on December 5, 2014 [1 favorite]
My sister and her husband were the "we buy houses, especially the ugly ones" signs around Toledo Ohio for a while. No scam, they were looking for people who needed to move the house and didn't want to manage the fixing up. Their goal was rentals, so they'd buy the place, fix it up to the standards of the neighborhood (early mistake was fixing it up too much, beyond the neighborhbood) and get it occupied.
Pay a couple of hundred bucks for a good appraisal, figure out what convenience is worth to you, quote the step-son a price that feels fair. Hire a real estate lawyer to do the closing stuff. Somewhere between the cost of the realtor and the ease of the transaction, your parents and the step-son both come out a little ahead.
posted by straw at 7:06 AM on December 5, 2014
Pay a couple of hundred bucks for a good appraisal, figure out what convenience is worth to you, quote the step-son a price that feels fair. Hire a real estate lawyer to do the closing stuff. Somewhere between the cost of the realtor and the ease of the transaction, your parents and the step-son both come out a little ahead.
posted by straw at 7:06 AM on December 5, 2014
Somewhere between the cost of the realtor and the ease of the transaction, your parents and the step-son both come out a little ahead.
I agree, and it's worth doing the actual math. Selling a house isn't cheap, and sometimes the combined cost of realtor commissions, plus cosmetic and structural fixes, plus a few months of mortgage payments, plus the time and stress of inspections and odd requirements from the buyer's mortgage company can make a no-strings-attached cash offer look pretty good. Don't just compare the best case number from Zillow or your appraiser -- make sure to look at what you would actually walk away with after all is said and done.
posted by Dip Flash at 8:08 AM on December 5, 2014
I agree, and it's worth doing the actual math. Selling a house isn't cheap, and sometimes the combined cost of realtor commissions, plus cosmetic and structural fixes, plus a few months of mortgage payments, plus the time and stress of inspections and odd requirements from the buyer's mortgage company can make a no-strings-attached cash offer look pretty good. Don't just compare the best case number from Zillow or your appraiser -- make sure to look at what you would actually walk away with after all is said and done.
posted by Dip Flash at 8:08 AM on December 5, 2014
Best answer: I wrote a short answer earlier. Busy day, and didn't have time for more. But, I would like to say more now. I do a lot of real estate investing. I have bought 6 houses in this year alone. I have bought a few houses sight unseen, including one last year.
Your parents should not be stressed about having received an asset like a house. It is a windfall.
You do not need a realtor. If you are willing to accept a wholesale price for the house, then you can sell it very very quickly.
If you want to be paid the higher retail price, then you need to invest time and money into managing the property while a realtor markets the house for sale. You will need to open utility accounts, get the house painted, possibly make other repairs to satisfy home inspections, and lots more.
But, if you are satisfied with the wholesale price, you can sell it quickly. The wholesale price leaves some meat on the bone, so that an investor can come in, manage and market the property, and then turn a profit by selling it at the retail price. Is the time and effort needed to manage and market the house worth the difference in the retail and wholesale price? If not, then wholesale sell it by the end of the year. Get a nice cash bonus to end 2014, without a headache.
One thing to be clear about, don't let any investor get fancy with your parents with some elaborate purchase scheme. Your parents will accept only one thing: a pile of cash. If this step-son does not have the cash, some other buyer does, guaranteed.
However, if you are wholesale selling the house, you do need PROFESSIONAL ADVICE on how to do it. Paying for professional advice is a necessary fee on deducted from any profit. I live in Florida, where realtors frequently close real estate deals without lawyers. I use a lawyer on every investment deal. Buying and selling investment real estate has deeper complexities than buying a home you are planning to live in. One example, tax implications are different. A good real estate lawyer will be able to advice you on a wider array of issues than a realtor. Also, there are a lot more sharks in the water in the real estate investment game. A good lawyer can save you from a shark. They should have a lawyer.
Your lawyer will be able to tell you a fair market value, and then you just need to negotiate a price with the step-son - or any buyer. If you look around that area, I am sure you will see plenty of signs saying "we buy homes for cash". The wholesale price might be 30% lower than the retail market price you would get from a realtor. The difference in wholesale and retail price is a matter of negotiation. Your lawyer can help you better there too.
Most real estate lawyers will take this type of client without money up front, because the lawyer knows that once the asset (the house) is sold, he will get his fee. Your parents just need to call a real estate lawyer, engage his services, and then have the step-son call the lawyer.
As soon as the lawyer has the cash in hand (certified cashier check or direct deposit into lawyer's escrow account), then they sign. They only sign after the cash is in hand. As far as your parents are concerned, they are selling the house on a quit claim deed, and the buyer takes over all liens, taxes, and encumbrances. If the buyer wants title insurance and a warranty deed, they need to pay for that themselves.
Call a real estate lawyer in that area monday, and within no time flat, you can have it sold. The only thing that might hold it up is a title search, but that shouldnt take more than two or three weeks. If the step-son does not have cash to put up now, some else does. Locate any REIA in that area (Real Estate Investment Associations), and you will find a network of real estate investors. Start calling the signs that say, "we buy homes for cash" - because they do buy them, at wholesale prices.
posted by Flood at 5:19 PM on December 5, 2014 [1 favorite]
Your parents should not be stressed about having received an asset like a house. It is a windfall.
You do not need a realtor. If you are willing to accept a wholesale price for the house, then you can sell it very very quickly.
If you want to be paid the higher retail price, then you need to invest time and money into managing the property while a realtor markets the house for sale. You will need to open utility accounts, get the house painted, possibly make other repairs to satisfy home inspections, and lots more.
But, if you are satisfied with the wholesale price, you can sell it quickly. The wholesale price leaves some meat on the bone, so that an investor can come in, manage and market the property, and then turn a profit by selling it at the retail price. Is the time and effort needed to manage and market the house worth the difference in the retail and wholesale price? If not, then wholesale sell it by the end of the year. Get a nice cash bonus to end 2014, without a headache.
One thing to be clear about, don't let any investor get fancy with your parents with some elaborate purchase scheme. Your parents will accept only one thing: a pile of cash. If this step-son does not have the cash, some other buyer does, guaranteed.
However, if you are wholesale selling the house, you do need PROFESSIONAL ADVICE on how to do it. Paying for professional advice is a necessary fee on deducted from any profit. I live in Florida, where realtors frequently close real estate deals without lawyers. I use a lawyer on every investment deal. Buying and selling investment real estate has deeper complexities than buying a home you are planning to live in. One example, tax implications are different. A good real estate lawyer will be able to advice you on a wider array of issues than a realtor. Also, there are a lot more sharks in the water in the real estate investment game. A good lawyer can save you from a shark. They should have a lawyer.
Your lawyer will be able to tell you a fair market value, and then you just need to negotiate a price with the step-son - or any buyer. If you look around that area, I am sure you will see plenty of signs saying "we buy homes for cash". The wholesale price might be 30% lower than the retail market price you would get from a realtor. The difference in wholesale and retail price is a matter of negotiation. Your lawyer can help you better there too.
Most real estate lawyers will take this type of client without money up front, because the lawyer knows that once the asset (the house) is sold, he will get his fee. Your parents just need to call a real estate lawyer, engage his services, and then have the step-son call the lawyer.
As soon as the lawyer has the cash in hand (certified cashier check or direct deposit into lawyer's escrow account), then they sign. They only sign after the cash is in hand. As far as your parents are concerned, they are selling the house on a quit claim deed, and the buyer takes over all liens, taxes, and encumbrances. If the buyer wants title insurance and a warranty deed, they need to pay for that themselves.
Call a real estate lawyer in that area monday, and within no time flat, you can have it sold. The only thing that might hold it up is a title search, but that shouldnt take more than two or three weeks. If the step-son does not have cash to put up now, some else does. Locate any REIA in that area (Real Estate Investment Associations), and you will find a network of real estate investors. Start calling the signs that say, "we buy homes for cash" - because they do buy them, at wholesale prices.
posted by Flood at 5:19 PM on December 5, 2014 [1 favorite]
This thread is closed to new comments.
Yes. Or at least a realtor. I'd say that the odds are the stepson is a flipper who makes money on just this sort of situation -- people with "extra" houses who can't be arsed to put real effort into selling it for top dollar. But that doesn't mean you shouldn't cover all the bases beforehand. If he's a genuine legitimate businessperson, then he won't mind making sure everything is done correctly.
posted by Etrigan at 6:16 PM on December 4, 2014 [1 favorite]