The ABCs of Getting a Mortgage Loan for First-Timers

Posted on: 27 September 2017

When you want to sell your home fast, making a cash deal with an investor is one option that can help you unload the property and move on with your life as quickly as possible. However, it's important you do your research to ensure you're working with a reputable person and that you're getting a fair deal. Here are three things you need to do before signing the sales contract.

Conduct a Background Check on the Investor

For any type of high-stakes transactions, such as a selling a home, you should always check out who the other party is to ensure they're legitimate, and the same goes for any real estate investor who contacts you about selling your home. There are a couple of good reasons to take this precaution.

First, unlike real estate agents, investors don't need a license to purchase property. While this does provide some flexibility in how the sales transaction is handled, that also means the person you're working with may have little to no knowledge or experience with buying a home. This can lead to a number of issues, such as a low-ball offer and legal mistakes (e.g. filing the wrong paperwork).

Second, you want to make sure you're not being approached by a scammer. Since investors don't need a license, it can be difficult to weed out the ne'er-do-wells from the barrel of legitimate buyers. Doing a check on the investor can help you avoid falling for a con that leaves you broke and homeless.

Use the internet to research the individual and their company. People will typically write about their experiences with companies on blogs and review sites, especially if those experiences were negative. Ask the investor for references and call the individuals to get an idea of what it was like to work with the person. Lastly, many real estate agents typically know investors in the industry, so it may be helpful to contact a few agents to see if they know whether the investor is genuine.

Read the Contract Carefully

Even though the investor is paying you cash for the home, the transaction will proceed fairly normally. That means there will be a purchase agreement that lists the terms of the sale; therefore, it's critical you read the contract—and possibly have it looked over by an attorney—before you sign it to ensure everything is in order.

There are a couple of specific things you should look for on the contract, however. First, make sure there isn't a financing contingency. If the investor is paying cash, there's no need to wait for a bank to approve a loan, so a financing contingency may indicate a problem or misunderstanding.

Second, make sure the contract indicates who is responsible for paying what. If the investor is paying for the title search and home inspection, make sure the contract says that to avoid problems in the future.

Lastly, make sure there is a termination option in the contract. The FTC requires a three-day cooling off period for most sales. Unfortunately, real estate is not covered by this rule. So you need to make sure the investor builds this option into the contract just in case you change your mind. Be aware, though, that the termination option will also give the investor an opportunity to cancel the sale, so prepare yourself for this possibility.

Prepare to Move Quickly

The last thing you need to do is be prepared to move out of the home the moment the sale closes. Investors typically purchase homes for cash so they can renovate them and resell them for a higher amount. They typically like to close fast so they can get started on the process as quickly as possible. Thus, you may not be given any time to get yourself together after closing, so you need to be sure you can move out no later than the day of closing.

For more information about selling your home for cash or to get an offer on your home, contact a real estate investor.