The current real estate market is one that can be described as extreme. Whereas the market was extremely in favor of sellers and homeowners earlier this decade, it has swung back in favor of buyers with a vengeance.
Whenever a market, real estate or otherwise, is in an extreme position, people get desperate and creative. This can provide you with both the potential for an excellent deal and the prospect of financial ruin if you are not careful. There are many ways that things can go bad, but let’s take a look at some in this market.
A really incredible deal usually isn’t so great at the end of the day. The current foreclosure and distress sale market is brutal and such “deals” are festering on a daily basis. The number one issue that you see rising is the incredible seller financed deal. In this deal, the seller agrees to finance the entire purchase. Hey, what a deal! The terms are favorable, but you have to put down 20 percent. On a $400,000 home, that is $80,000.
So, how can this deal go bad? Well, it has to do with title. This is going to sound really crazy, but there are a large number of homes on the market these days that nobody really knows who the owners are. Why? Well, they homes are foreclosures or walk away deals. Technically, this means the mortgage lender owns the home. The problem is the loan on the home has been sold so many times that nobody knows who exactly is collecting on it!
Realizing this, some entertaining scam artists have been selling homes they don’t own! Since they offer complete seller financing, the buyer often falls for the scam since no title search is done. Once the $80,000 is handed over, the seller is told to send payments to a particular address. This turns out to be a post office box somewhere. The money is gone, the seller is gone and the buyer owns nothing. It’s a disaster by any measure.
There are many variations of this deal. All cater to one thing – greed. We all want to score the incredible deal and we hope that maybe this is the one. We know it probably isn’t, but what if it is? What if we miss it!
You must discipline yourself against this. If some incredible deal comes across your path, do one thing. Hire a real estate lawyer to review it. If the lawyer says it is good, it is money well spent. If the “seller” runs for the hills, it is the best money you ever spent in your life.
Raynor James writes on real estate issues. View or sell
homes for sale by owner at FSBOAmerica.org.
