All Cash Offers May Be Questionable In Real Estate Transactions

Real Estate News Article

< Back

All Cash Offers May Be Questionable In Real Estate Transactions

Written By: Benny L. Kass
Tuesday, December 05, 2017

Question: I often see advertisements offering "all cash for your house or condo." Some of these ads offer to give monthly payments for equity. What type of guarantee is the seller offered so as to insure that he/she gets the full amount. Suppose the company goes bankrupt? How can these companies offer such benefits as "three times your equity"? Your response would be helpful.

Answer: The moral of this column can best be summed up with the old adage "caveat emptor -- let the buyer beware."

As with any transactions among strangers, most are legitimate, but many are fraught with problems, including fraud. You have sent me a newspaper clipping, whereby a promoter offers to buy any house -- often sight unseen -- and pay the seller on a monthly basis any equity that exists in the house.

At first blush, this may be a good deal. You -- as seller -- will be able to sell your house, and take payments on an installment basis.

Furthermore, by selling your house, you will be >But this is theory; in practice, there can be many problems.

Let us look at some of the possible pitfalls:

1. Buyer goes into bankruptcy. You raise the question of the possible bankruptcy of the purchaser. If the proper protections are taken at the time of settlement, the filing of bankruptcy will create a delay, but should not pose a major problem for you. If you take back a first deed of trust from your buyer for the amount of the equity you are lending, and if this deed of trust mortgage is properly recorded in the land records where your property is located, you will be a secured creditor. In the worst case, you will ultimately get the house back.

But, if you already have a first mortgage on the property, and your buyer does not pay that off in full, you will only be able to obtain a second trust from your buyer. In this second-place position, you will be at greater risk. If the buyer does not pay you, I suspect the buyer will also not pay the first trust lender. The first trust lender can foreclose on the property and your second deed of trust may be wiped out.

2. Due on Sale clause. Most mortgages contain what is known as a "due on sale" clause. This means that upon the sale of your property to a third party, your existing lender can call the entire unpaid balance of the mortgage due. While lenders do not often assert these clauses, the possibility remains. This is too great a risk, and I cannot recommend you enter into such a sale without first obtaining your lenders approval of the transaction.

3. Additional encumbrances. Even if you own your home free and clear, there is nothing to stop your buyer from taking out a new mortgage on "your" home after settlement. If that new lender does not receive the monthly payments on time, it can foreclose. This can cause you a lot of aggravation, as well as uncertainly and legal fees.

4. Financial status of your buyer. Before entering into this kind of transaction, you must learn more about your buyer. Are there any tax liens against the buyer that could become a super-priority lien ahead of your deed of trust? Is your buyer judgment-proof -- i.e., you will not receive any money even after you successfully obtain a court judgment.

5. Sales Price. What price are you willing to accept from this buyer? Clearly, that buyer is not a charitable organization; there is a profit motive behind the transaction. Why should this buyer offer you market price for your house, since when the house is ultimately resold, your buyer will not make any profit.

6. Guarantees. You ask what guarantees your buyer can give that you will ultimately receive payment in full. The short answer is none. Unless your buyer pays you all cash, you face a serious risk -- on a monthly basis -- that you may not get paid in full. After all, you are dealing with a stranger -- and one who presumably is in the business of buying and selling houses. If there are any tricks -- and if the buyer is not completely reputable -- they will use every trick in the book to take advantage of you.

My bottom line is to stay away from these types of transactions. While they appear attractive, there are too many pitfalls.

If you are desperate -- and still want to go ahead with such a transaction -- please consult your legal and tax advisors before signing anything.



Copyright© 2017 Realty Times®. All Rights Reserved

Updated: Tuesday, December 12, 2017

REALTOR Analysis Of Tax Bill I...
It is no secret that the National, State, and Local Realtorreg; associations are strongly op...

Why Chinese Real Estate Invest...
Despite taxes on foreign real estate buyers in the Vancouver and Toronto areas, Chinese inte...

Purple Power: How To Use Panto...
Seeing a whole lot of purple recently“ Its not an homage to Prince. Its Pantones Color...

Copyright ©2017Realty Times®. All Rights Reserved

Housing Rebound: Factors to Consider
In Miami we have had an incredible year of growth with an ever shrinking supply of condos...

Hoteliers Buy Versace Mansion at Auction
Gindi Family and Nakash Family of New York were the winners of the auction for Casa Casuarina...

Stunning Estate for Sale on Allison Island
Allison Island is one of the man made islands comprising Miami Beach. One half of the island...

Avant Garde and Luxurious Penthouse on Fisher Island
Fisher Island is home to some of the highest net worth individuals in Miami. It is a private...

6000 Indian Creek, Condominium Spotlight
6000 Indian Creek is a Sieger Suarez project that was completed in 2007 and consists of...

$35 Million Buys you THIS on Star Island
$35 Million for a home on Star Island is par for the course in Miami Beach real estate....

Development Update
It is looking like a dusty winter season in Miami, with all the construction rapidly underway,...

North Bay Road Charm, 4330 North Bay Road
4330 North Bay Road is a stunning example of Mediterranean architecture in Miami Beach....

Best Home Improvements for Resale Value
It could not be a better time for a homeowner to list their home for sale in Miami. The...

Biscayne Gets a New Development
The Melo Group of developers acquired 601 NE 23rd St last year and have conceived of 23...

520 West Ave Residence 2301
520 West Avenue is home of the Bentley Bay. Bentley Bay is comprised of two modern towers...

Spice 2013, Guide 101
Miami Spice is a program whereby most of the restaurants in the city encourage people to...

Hollywood has a New Hotel
Margaritaville Hollywood is coming to Hollywood Beach and is likely to completely alter...

Sustainable Waterfront Home on Normandy Isle, 1.85 Million
Rarely on the market do we find completely sustainable, off the grid, homes in Miami Beach....

Housing Inventory on the Rise at the Close of Summer
The Wallstreet Journal released numbers via Realtor.com regarding the inventory of available...

Warm Spanish Style Home Listed on the Sunset Islands
1844 W. 23rd Street is listed on the Miami Beach luxury real estate marketplace for $11...

Former Gansevoort Getting Complete Eco-Renovation
Last year the Perry Hotel, formerly the Gansevoort, was purchased for $230 million. The...

Affordable Luxury Waterfront on Hibiscus Island
A home that is considered affordable in Miami terms for waterfront is generally between...

Bart Reines New Masterpiece Released on the Market
Bart Reines is one of the worlds most impressive modern architects living, and he has just...

New Listing on La Gorce Island
98 La Gorce Court has just been listed for sale. This over 7800 square foot home with 8...