Selling Your Home to Cash Buyers: 6 Important Rules to Follow

There are a lot of people and small companies that claim to be “real estate investors” or “cash buyers” after watching a couple of online videos or attending a weekend seminar. In reality, they have little to no experience and use deceitful tactics to take advantage of home sellers.

Unfortunately, it’s an unregulated industry and anyone can claim to be a cash buyer or real estate investor. There is no license required in Texas to be a real estate investor. Anyone can do it - all they need is an email address and a phone number.

It is extremely important to educate yourself to avoid being the victim of a scam. Follow these 6 important rules when selling your home to cash buyers.

Ask for Proof of Funds

This may sound simple but it is the most common mistake all home sellers make. If you are going to sell your home to a we buy houses company the most important thing you can do is ask for proof of funds.

Real estate investors have cash, and they aren’t afraid to prove it. A bank statement or line of credit letter from the bank are the only two forms of proof you should accept.

If the cash buyer is hesitant or slow to get your proof of funds, they don’t actually have the money to buy your home and will likely never be able to close on the sale of the property.

Do not make any exceptions to this rule, ever.

Never Allow for an Inspection or Option Period

We buy house companies and professional real estate investors are experts and don’t need a third-party inspection or “option” period to decide whether they truly want to buy your house or not.

Legitimate real estate investors know what to look for and can identify any areas they may need to address without the need for a contractor, inspector, or any other person to look at the house.

In Texas, the term for an “inspection” period is referred to as an “option” period.

During the option period, the buyer can back out of the contract for any reason or no reason whatsoever. It is simply an “option” but not a requirement to buy the house.

If you are being asked for an option or inspection period, this is a big red flag and you are likely dealing with an amateur rookie or buyer who has no intention of ever closing on the sale of your house but rather trying to assign the contract.

Also Read - "How Do I Find Cash Buyers"

Watch Out for “And or Assigns”, “Assignment” or “May Assign”

You must carefully read any real estate contract and look for the word “assign” or any variation of the word.

Anytime this language is used in a real estate contract, the buyer has no intention of ever purchasing the home but rather assigning the contract to another person or company.

Why would they do this? The answer is simple. This is a very common tactic used by fake real estate investors who do not have the money to actually buy a house.

Rather than purchase the home, the fake real estate investor will assign their rights in the contract to another party for a fee, or price higher than agreed upon with you the seller. This is their profit on the transaction without ever actually buying the home.

This tactic is almost always used in conjunction with the option period. The fake cash buyer will use an option period to try and find a person to assign the contract to. If they are unable to find anyone, they can terminate the contract without any recourse.

Now it’s closing day, you’ve moved out of the home, and the buyer has suddenly terminated leaving you in a very difficult situation.

To protect yourself even further from this happening, you may consider requesting language be added to the contract that specifically prohibits the contract from being assigned.

The rule of law can be a little grey here, with some attorneys arguing if it doesn’t say you can’t then you can.

It’s always recommended to close up any contract loopholes and make sure you are working with a professional real estate cash buyer.

Earnest Money Deposit

This one is easy, legitimate real estate investors or cash buyers have no problem putting down an earnest money deposit of $5000 or more.

This deposit is credited towards the purchase price at closing and should be no issue for any buy houses company or cash buyer who truly is going to close on the sale of your property.

If you see anything less than $5000, ask that the deposit be increased to prove the buyer is serious about going forward with the home sale.

Closing Date of 30 days or Less

Unless you need more than 30 days, legitimate real estate investors and cash buyers can usually close in 2-3 weeks.

If there are title issues, inheritance documents that need to be completed, or an unresponsive lender in providing a loan payoff, the closing may need to be extended.

Long closing dates are usually a sign the fake real estate investor wants extra time to try and assign the contract.

Texas Real Estate Commission (TREC) Contract

TREC is the state governmental agency that licenses real estate agents and as such, provides state-promulgated forms for the use in buying and selling real estate.

While a real estate investor is not required to be licensed, and most are not, they should always use the appropriate real estate contract provided by TREC.

The TREC contract protects the buyer and seller and is considered the gold standard for Texas real estate transactions.

There is no need for any buyer-added addendums other than those provided by TREC. Any buyer addendum or buyer-prepared sales contract is guaranteed to be one-sided and in their favor and not yours.

If you are asked to sign anything other than a TREC contract or TREC addendum, it is advisable to have an attorney review the documents before signing.

Conclusion

Selling your home to cash buyers is a popular and easy way to sell your house. Make sure to always ask for proof of funds, never allow for an option or inspection period, watch out for assignment language, get at least a $5000 earnest money deposit and lastly, use a TREC contract. By following these 6 rules, you will be on your way to a successful and smooth closing.