We Pay Cash
We’ve all seen the signs, ads on the Internet, and on TV. There are quite a number of businesses and individuals advertising cash and quick closings for properties. I’ve worked with a few Sellers who answered those emails, cards in the mail, or called the number on signs they saw. The out come is always the same. A low ball offer.
In most cases the potential cash Buyer looks at the tax assessment on the property, which in most cases is much lower than the market price. They may offer a full tax assessment, or a percentage of the tax assessed value. Those cash buyers tend to look for elderly people who purchased their homes years ago when prices were of course low. Then offer maybe $10,000 over the original purchase price, making it look like it is an offer of a life time. In most cases that offer price is a fraction of the market price.
It is always a good idea to send out a CMA (Comprehensive Market Analysis) whenever a Seller first contacts you. The local MLS does a great job of putting together a great looking CMA for presentation and you can easily email it to Sellers. The good thing about the CMA is, it updates automatically when Active units sell. In some markets prices rise faster than a skyrocket. Most Sellers take their time to make a decision. In a fast moving market an Agent can call the Seller and have them take a look at updates on the CMA. When the Seller sees a number of properties sold for more than asking price, that is normally enough for them to pull the trigger.
When a Seller is considering a cash buyer, looks at actual market prices, and sees the low ball offer from one cash Buyer, that is usually enough to satisfy their curiosity. The Seller was thinking, they could save themselves the price of a commission and make a quick sale. When they look at market prices and compare that to the low ball offer, that commission suddenly becomes a wise investment.
Then we have a few warnings to review. Some cash Buyers, normally individuals involved in the industry have developed scams to milk every dollar they can out of Sellers they deal with. One of those scripts is the incomplete deed or LLC deed. Some of those cash Buyers have their own teams they work with. Fake inspectors who come in, nitpick the property, write a report with estimated repair costs, and hand it to potential Sellers. Others run a more sophisticated scam involving an LLC or a number of Deed transfers from one LLC to another.
In rare cases the Seller later finds out their name is on an LLC associated with the property. The cash Buyer may purchase the property as an LLC, use the property as a rental, collect rent for a number of years, but not pay taxes. After a few years the Seller receives letters from the city about back taxes. The Seller digs into the situation to find out that cash Buyer assigned their name to an LLC that owns the property. It is rare, but I have seen it happen.
We never know what is on the horizon. When scammer Buyers get involved with Title Companies willing to work with them, anything can happen. Scammers can use the LLC and property to secure loans from loan sharks. The Seller who thought they went through a normal Real Estate Sale can suddenly find themselves deep in debt with no idea any of that was happening. Loan sharks made their money from bad loans, as long as they can attach it to a property, they stand a chance of getting more in return than what they loaned.
Is any of that legal? The thing is, you never want to put yourself in the situation of finding out. This is one of the reasons a series of Deed changes raises red flags. In most cases those Deed changes lead to someone trying to hide something. You may be in the right. You may be completely innocent. But the legal fees to defend yourself in court can run into more money than the actual funds you collected on that quick cash sale.